Do We Really Have Enough Coverage For This Dividend?
As we head to test lows, I'm trying to decided between Suburban Propane Partners (SPH) and Inergy (NRGY).
SPH looks extremely well managed based on their return on equity, and they have good coverage for their debt.
Inergy has too much debt, and I don't like their coverage for that debt. Take the EBITDA and subtract away the maintenance capital expenditures, and you really do not cover the dividend well. Can someone give me some reason to believe that they should be expanding the dividend as they did recently when they have negative cash flow and cannot even cover well on the old dividend?
I read somewhere that Inergy is expanding into midrange assets like storage facilities. Can someone expand on that and what kind of cash flows are they projecting for those efforts, and when? Are they fully funded projects?
Inergy has a much higher dividend than SPH, but that reflects higher risk and more problematic management of debt. But both look interesting and I would like to hear the bull and bear arguments.
Excerpt from Raymond James strategist Jeffrey Saut's latest essay, published Monday (March 2nd):
In past missives we have posed the question, “What if, by flooding the system with money, creating negative real interest rates, reintermediation, and stabilizing the financial meltdown, Ben Bernanke is closer to fixing the economy than anyone currently thinks?” If so, what should precede a stock market rally would be a rally in corporate bonds, a rally in copper, a rally in TIPs (Treasury Inflation-Protected Securities), and a general rally in all reflation “plays” as the current pricing of extraordinary levels of deflation into stocks/Treasury Bonds fades. And, that is what has started to happen with copper rallying 7.9% last week, crude oil better by 15%, and unleaded gasoline surging 18.6%.
Energy is particularly interesting to us since we have maintained the belief that crude oil bottomed back in January in the low $30s. Current energy-centric names on the Analyst Current Favorites list include: Consol Energy (CNX); Continental Resources (CLR); Inergy (NRGY); and Transocean (RIG).
NRGY is referred to an accidental high yielder... the lower the stock goes, the higher the dividend percentage. Yes, good question raised about being able to pay the dividend. The trend of recent accidental high yielders is NOT paying the dividend, which may be the case with NRGY, who knows? With NRGY you have to put in your limit stops so you don't get the shaft if it tanks too much. With this market you can't put your eggs all in one basket. I would diversify with several high yielders and keep 50% in cash, once you get 10-15% profit cash out or set your limit stops.
More News related to NRGY Wunderlich Securities Initates Coverage on Inergy (NRGY) with a Buy Inergy (NRGY) Reports Mixed Q4 Earnings; Guides FY09 Adj-EBITDA Inergy Reports Record First Quarter Earnings and Raises 2009 Outlook Inergy, L.P. Prices Private Placement of $225 Million of 8¾% Senior Notes Due 2015 Inergy, L.P. Announces $200 Million Private Placement of Senior Notes Due 2015 More News related to NRGY More News related to New Coverage Wunderlich Securities Initiates Coverage on GeoMet (GMET) with a Buy Barclays Assumes Coverage on National CineMedia (NCMI) with an Equalweight Barclays Assumes Coverage on Cinemark (CNK) with a Equalweight ThinkEquity Initiates Coverage on Emulex (ELX) with a Buy Morgan Stanley Resumes Coverage on Terex (TEX) with an Overweight More News related to New Coverage February 11, 2009 11:28 AM EST
Wunderlich Securities initates coverage on Inergy (Nasdaq: NRGY) with a Buy. Price target $28.50.
Wunderlich analyst says, "We conclude that NRGY units have strong defensive attributes based on stable cash flows from the distribution of necessity products and fee-based midstream operations. Coupled with the potential for a more normalized yield valuation over time, we believe the units have upside potential from current levels...NRGY has shown a remarkable ability to maintain margin in the face of weather-driven volume variability and customer conservation...NRGY has a strong cash flow cushion that protects its distribution to limited partners, which we expect to continue."
Inergy, L.P. (Inergy) owns and operates a diverse retail and wholesale propane supply, marketing and distribution business.
If you're looking for stocks that raise their dividends.. A few I feel are safe investments .However, that doesn't make them safe . So do your own homework as well. I hope you know how important it is to diversify your stock holdings – don't put all your eggs in one basket. ...
I like ,MMP ,PGN, BP,NRGY,T,MO and also NAT which pays a good dividend. But NAT does not raise their dividend every year or 1/4 as the others.
NRGY has a high P/E but has been good to me from 2004 to now.