I sold off NSLP this morning, I didn't like their plans on the call, or the coverage. That leaves me with four, BBEP, LINE, QRE and my favorite, good old safe VNR. QRE is not a conviction hold, I like the management and the sponsor, but there are some structural problems there that will require a couple years to work through. I bought it because it was so cheap, and it remains so, the best bargain in the space now that LINE has recovered a bit.
But that's not nearly diversified enough, I bailed out of a big position in EROC, a company in which I had zero confidence, but a huge profit that made me curl when I wrote the estimated tax check, sold MWE when it ran up, and dumped all that here, making LINE my largest position. But I really don't like LINE that much, it's too big and needs monster deals to advance, which if they screw up, can have major consequences. LINE used to be my smallest holding in the upstream space, and it will be again.
I'm not selling anytime soon of course, I'm thinking next summer, when the LTCG holding period runs, will coincide with a nearly full recovery in price, like the mid to high $30's. What MLP's do you like now that I should watch and see when there's a good price to get in? Given LINE is paying me over the margin rate, I wouldn't mind buying in advance, so I'm pretty much open for replacements as soon as the next quarter or two.
My requirements are consistent coverage, leverage targets (at least) in the 3.0X EBITDA range, intelligence and integrity in management, good hedging, and a reasonably high yield, at least 7-8%. Whattya got? TIA.
Morning Ruby Have another one for you to check out. EMES--check it out , it may meet your criteria and diversify you from upstream. Its a sand play on fracking. I just recently started a position. Have not taken any away from LINE--although I am beyond break even. Cheers.
Ruby, WPZ is on the low side of your div requirement but has been a steady dividend raiser. Recent expansion bodes well; I buy on dips below 50. SFL isn't an MLP but is into marine drill rigs and transportation and has been a good producer for me with div and appreciation.
Trust, WPZ is one I used to own, sold it when it ran up. It pulled back and it's been flat since. Which isn't a problem for stable cash flow of course, but I'd like to see unit value keeping up with distribution growth. I understand the forward guidance is very solid, but their coverage record is spotty, they haven't covered on an annual basis for two years. I don't know, they've got a big drop down coming Q1, if the unit price takes a serious hit, maybe, but I'm not sure I trust their guidance, given the past.
BDC's were mentioned. If you are considering expanding beyond MLP's, (which you said you were not) ARCC has been a good holding for me with about 8.5% yield. Worth looking at ARCC summary on YAHOO and the SA article ranking BDC's...ARCC has highest rank considering several factors.
Also, it's always good to watch interest rate trends when managing an income oriented portfolio...e.g., ^TNX for the 10-year treasuries.
When tapering starts(within next 6mos) BDCs are going to be less attractive due to increased % rates and Dividends may change. Be careful with BDCs(and I like bdcs) now as tapering is coming and so are increased % rates. Good well positioned MLPs are going to do well in 2014 and Line is going to kick some serious bu--. so hang in there as 35-38 is coming
Fred, I have committed money to BDC's before, and similar companies like RSO and NRF, among other REIT's. It's just that, I don't trust the economy, I think another financial crisis could easily happen, and BDC's just get ruined in such conditions. ARCC survived the crisis and was on of the few to maintain a payout, but it was damaged, and currently pays a dividend roughly the same as it did in 2007-08, five years ago.
Oil and gas prices can also plunge, barring stagflation, but the lesson learned from the financial crisis is that well hedged MLP's can bridge the chasm and keep the cash flowing, and considering I live in retirement off cash flow, that's my first requirement, safety. I don't see conditions improving to the point where I would invest "normally", every day that goes by the fed, in cahoots with the rest our worthless government, digs a bigger hole.
ruby and board members...some investors here may want to take a look at MLPL (yield about 9.1%), MLPL is double leveraged and is a fine bull market holding (and I am well pleased with it)...here are some Total Returns on it...
Is up 53.7%...over year over year
Is up 88.5%...over 2 years...
Is up 131%....over 3 years...
Is up 197%....,over 4 years...
MLPL is a basket of about 25 energy related MLP's and there is no K-1 to mess with (who need tax breaks, with returns like that, ???)...! $tagg...!
Interesting one is VOC..Few have heard of or follow..I do..Started buying in the 14's and has done way more than anticipated. Simple operations and payout is everything less administrative costs. Yield is high..which you might be concerned with..Anyhow worth a look. My other love is bbep..I also play the sell puts situations and when bbep dropped to 18 plus on additional issue..I sold June 20 2014 puts for over $3.00..Nice big check and if it drops (which I doubt) I'll own more at under 17.. Semper fi..
Playsgolf (I'll make a note of what I'm replying to, since Yahee will scramble these up), VOC is a trust, which I avoid for two reasons. First, obviously, it's on a slow death march, there's no way to add equity and holdings (which means the high return is partially an illusion). Second, they don't hedge. Prices drop and so does the distribution. No thank you.
Ruby, I have no idea of the contents of your portfolio or your needs and goals, but there is a place for Preferred stock. After Preferred corrected not long ago I started adding some with a average yield of 7.8%. In December the funds will jettison all losers and Preferred as house cleaning for the new year ,buy when the prices plummet . I plan to add some to bring the Preferred to 40% of portfolio.
Phil, Ghondula makes a valid point, a little forcefully, as is his wont. I think rates could skyrocket once we reach a tipping point with our disastrous debt situation. Of course, in that situation inflation would surge as well, probably delayed by a severe deflationary recession. But well-hedged MLP's can live through a calamitous drop in energy prices, especially if there's a mountain on the other side of the gorge. Don't think interest rates can rise like that? Then you weren't around for the Jimmy Carter years. Once burned . . .
Tell that to the Tennessee Valley Assoc (TVA) that just announced they are shutting down 6 of their coal fired power plants and converting them to NG. There is so much NG being produced they are being forced to either shut in drill sites or burn off excess to maintain the price. Just what is needed, new supplies of NG from coal deposits.