How do Cheniere Energy Inc (LNG) investors decide what is a reasonable share price?
I am a CQP investor and its distributions give me a basis for this decision. If I want a yield of at least 6 percent, the current annual distribution of $1.70 equates to a share price of about $28. Cheniere estimates that the CQP distribution will be about $3.10 when trains 1-4 are operational, which equates to a price of about $50. That being the case, I think that over the next few years, CQP should work its way up to about that price, slowly for the first year or two, then fairly rapidly. So I think it makes sense to invest in CQP now, getting a yield of about 7 percent along with the capital gains.
LNG does not currently pay a dividend, but has stated that they anticipate a $2 dividend in 2016. How do investors decide what is a fair price for LNG now? Of course, another question would be why invest in LNG rather than in CQP?
CQP is an MLP so pretax $ should not be used for this. Kind of like a REIT. You are buying a stock that is more like a mortgage so it has a certian return interest rate that has to beat other returns based on its risks. Dilution is your real enemy and you will constantly see that. Comes with the terratory.
Like every stock the buyers and sellers will dictate the stock price based on the business and its model. As I have said before I traded this stock heavily for a long time. Now due to events to date I am an investor and will hold.
If you are saying that a stock's price is whatever a buyer and a seller are willing to agree upon, I can't disagree with that. What I am asking is how do LNG investors decide what they are willing to pay?