I'll have to say that the market is pricing this stock based on a $.25 distribution. While that seems reasonable in the long run, it may not pay that distribution to start, and we still don't know when distributions will begin.
I believe the retail investors returning to the market right now are hungry for yield, and this has bid up the MLPs and preferred stock that I own.
Keep in mind that this is still a speculative stock, that it has sold off assets, and that it is laboring under an interest burden (not so much a debt burden anymore) that was based on its worst and most risky times.
I like the stock, but its not that good a poker bet at $10, unless someone knows something I don't know.
Hold but don't buy, and my idea of a reentry point is down about $8 or less.
My bad, Ross. I had the wrong number of preferred units. With 14,700,000 preferred units, a $.0375 additional quarterly payment per unit is about $550,000, very close to your original estimate.
Thanks. I knew it wasn't a bank buster to make the div .25 and having to factor in the additional payment to the preferred shareholders.
Makes .25 seem more and more like a reality doesn't it?
Amore, you wrote: "Keep in mind that this is still a speculative stock, that it has sold off assets, and that it is laboring under an interest burden (not so much a debt burden anymore) that was based on its worst and most risky times."
Yes XTEX got rid of some of its not to well performing assets, but keep in mind what management has said about expanding, which is what a good deal of the refi is about. XTEX wants to expand their pipeline network northward, which makes sense sense the vast majority of coal fed companies are switching to natural gas. XTEX is in slim ready to come out swinging condition right now, and if the financial people get on board, XTEX within five years may have 5-6000 miles of pipeline and fractionaters place in strategic positions around the country. So I would not be so quick to write them off. Morningstar, SeekingAlpha and Zack's all seem to be getting onboard XTEXs business plan, and despite the downturn in stock price right now (which is true for all stocks right now), XTEX will do great in the next couple of years.
In so far as a dollar a year dividend...well the financial rags all think it can be done. Also take a look around at some of the other MLPs which (although P/E ratios mean nothing to MLPs) show a lot of them selling at huge multiples of earnings, and they still are just paying a dollar a year dividend.
Calm down, have a drink, put your stock in a sock (one that is not washed and hide it) and dig it out in about 18 months. You will be glad you did.
I always thought of speculative stocks as penny stocks in gold mines in Canada where no gold had been found as of yet, but digging was going on fast and furious from the money raised in the 20000000 @ .02 a share offering.
See Seekingalpha...they state that XTEX will start a $1/yr dividend in the 4Q. I don't have a subscription to Morningstar so I have to go by their free information. The only thing which they have reported is that they were raising XTEX to a 3 star investment.
I assume you are talking about Q4 2010. I would be shocked to not see reinstatement of distribution before that. How old is that information?
Also, based on number crunching including questions about performance in Q2 and Q3 due to lack of demand (poor economy), I would be surprised with anything above .18-.20 per share/unit. I do not think they would reinstate on agressive side and not be able to produce. Thus, I see a lower number for 2010 and a higher number for 2011, possibly around .30 if economy recovers and remaining assets perform as hoped.
Plus, management may have growth plan that could also hinder ability to pay larger distribution in short-term (next 2-3 years.)
I mainly post on the XTXI board. However, here is my opinion based on recent events (posted yesterday on XTXI board.)
Just announced the close of the preferred to Blackstone. Now, Crosstex has received the funds for its recent sale and for the preferred to pay down debt. This means they can now move forward with the debt refinance. Now they are surely trying to negotiate favorable interest rates, leverage ratios, and repayment dates on the debt.
Based on how agressive management has been recently, I expect this to be announced by mid-February. I think Q4 earnings is due out around March 2nd. This report will beat expectations. I also expect, at that time, Crosstex will announce the reinstatement of distribution/dividend starting in June for Q1 earnings which will also beat.
It looks like the quarterly distribution for XTEX will be somewhere around .18 to start (for year 2010 - .72 annual) which will be in-line, but just under the preferreds. They may hint at move toward .30 for year 2011. Based on this, I would anticipate XTEX going for about $15 with a 5% yield which would be around 8% yield for 2011 distribution. As we move closer to 2011, I foresee XTEX moving closer to $20 as long as economy keeps improving and NG demand keeps the pipes flowing.
As for XTXI, they will not pay the type of distribution that will be going to XTEX. However, as the corporation and general partner, I expect stock price to be similar to XTEX. Remember, many institutions and mutual funds can only own XTXI as is the same as the management's ownership.
Added: So I anticipate XTEX will continue to head upward. As far as preferreds putting pressure on stock price due to conversion (basis at $8.50pps), I am confident that Blackstone will not convert due to the guaranteed divi. Even if XTEX was to hit $20, there is no real reason to convert to common unless they wanted to sell out of their position - but even then they could probably sell the preferreds to another party.
The only way I see Blackstone selling out is if XTEX goes stagnant, shows no profit for 3Q, gives up expansion, etc. and Blackstone carries enough weight to not see that happen. As a matter of fact, I bet we see another Blackstone exec on the XTEX BOD. Any bets?
Well, I wouldn't expect XTEX to hold $15 on a $.72 distribution. That's not even 5%, and I can get 6.5% on KMP, a large, successful MLP.
If they reinstituted the distribution in Q1, it would be paid in May (15), not June.
And of course we just guessing as to when and how much, especially in 2011. I like your logic on the initial distribution, that is, that it will be under (I'd say the same as) the dividend on the preferred stock.
I like the stock long-term, but I just don't see any upside to $10. I assume the price of NG will go down (seasonally) in the spring, and that the appetite for risk and yield that is pushing this stock up might disappear with a market dip.
But I'll jump back on the bandwagon if it does appreciably lower.