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Inergy, L.P. Message Board

  • wareham2620 wareham2620 Jan 24, 2009 3:45 PM Flag

    Long Term Growing Income

    Inergy, L.P. (NRGY) has released its 4th quarter and year end results. The company had a nice year and was able to increase distributions by 7% over 2007. Inergy has increased the distribution for 28 consecutive quarters. The company has two main business lines: Retail propane distribution and midstream natural gas processing. I found several items in the press release linked above to be of special interest:

    The midstream business is entirely fee based. This allow them to avoid the fate of the product sales based midstream companies like Atlas Pipeline Partners (APL). For the year, Inergy’s gross profit on midstream operations increased 59% to $92 million.

    Annual propane sales of 331.9 million gallons were 30.3 million gallons less than in 2007. The primary cause was customer energy conservation due to significantly higher prices. In spite of the lower volume sales, Inergy still generated propane sales and service profits of $410.3 million was $11.7 million higher than for 2007.

    The most interesting revelation in the press release was the reiteration of 2009 EBITA guidance of $277 to $294 million. This is a very nice increase over the $239 million earned in 2008. The low end of the 2009 projection is a 15% improvement over 2008 and the high end represents a 23% bump.

    It appears Inergy will be able to continue its streak of growing distributions for the foreseeable future. The current distribution at the current share price gives a better than 15% yield. I would consider this stock an excellent value for those looking for long term growing income. When the market realizes after a couple of more dividends that the growth will continue, this will be a $25 stock again.

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    • Looks like you were right!!!

      • 1 Reply to rootsue56
      • Not I, but Tim Plaehn the man that wrote the above article.
        However, he has just written an article on another stock I hold,NAT.

        Nordic American Tanker: Excellent Long Play for the Income Investor

        Nordic American Tanker (NAT) has released its 4th quarter results and declared a 46th consecutive dividend. The dividend will be 87¢, payable to shareholders of record on February 25. For 2008, NAT paid total per share dividends of $4.89 (the 4 dividends previous to this announcement). During 2008 NAT shares started the year at about $33.40, reached a high of just under $42 in May and traded in the $24.50 range during the lows of October before finishing the year at $33.75.

        Nordic American Tanker currently owns 12 Suezmax tankers, one on long term charter, the rest are chartered in the spot market. The company has recently purchased another Suezmax tanker and plans to take possession this month. The company has two new buildings on order with estimated delivery dates in the 4th quarter of 2009 and the 2nd quarter of 2010. The additions to the fleet are projected to increase distributable cash flow by 25%. NAT is debt free but recently raised about $107 million in capital by issuing stock and increasing the shares outstanding by 10%.

        NAT earned an average of $40k per day per ship in the 4th quarter. Currently Suezmax spot rates are in the $34k per day range. Nordic American Tanker has a break even of about $10,000 per day per tanker. This is the main reason I like this stock. It can be profitable and pay a dividend in any market condition. The company's 11.5 years of continued payouts speaks for itself.

        Over the last 5 years the annual dividend payout for NAT has averaged $4.72, ranging from $3.81 to $5.85. Holders of the stock have consistently earned over 10%. An eyeball at the stock chart shows the shares averaging around $35 with buying opportunities when the cost falls below $30. I think NAT is an excellent long term holding for the income investor.

        Best of luck to you