I'd like to buy a position in FGP (I have a good size position in APU and about 12 other LPs - so it's not like this is my first LP rodeo) but I can't understand this 500% payout ratio. I am a buy forever, live off the distribution, and pass on the units to my children kind of guy. Once I buy, I really never sell. I obviously like the FGP distribution, but I've learned "too good to be true" is always just that. (I lost some money on Can Royals chasing a really high distribution).
So explain to me how a company can continue to pay out a 17% distribution when it is 5X the earned income? Is it always at these levels or is this just a temporary, unusual year? I know they have made a good distribution for a lot of quarters in a row, but is it always with borrowed money?
Are any of you long term holders, or is everyone basically a trader? Does anyone else share this concern, or if not, how have you answered the question for yourself? I'd appreciate any light you could shed.
I have held FGP for at least 5 years and have recently added to my position. I'm retired and enjoy income from FGP, among others, with no intention to sell. Price fluctuations are of little concern to me.
FGP and Blue Rhino merged in 2004, which strengthened what is a solid franchise. They have managed to maintain market share and have actually it has grown a little. According to an S&P report dated last week, they expect FGP's cash flow coverage of the dividend to improve this year, franchise solid, excellent expense management. Yield is higher than their counterparts, APU, NRGY, due to higher leverage but financing is solid. I recommend this for the long term income investor.
I have been in FGP for over five years, they have grown earnings, and the company, over that time, never missed a divey, nor have they ever cut the divey. I don't know where you are getting your numbers from that you put in your post, but I don' think you know how to read a 10-k or a balance sheet, better you stick to the rodeo
Thanks for the input. I got my initial info from Yahoo financial "Key Data" which gives some general financial overview, but you make a good point. I should have looked a little deeper and I did. here's what I've learned. The good news: it's not as bad as first reported. FGP in 2009 had 53 Million in NET income while paying out 132 Million in Distributions. This would be a payout ratio of 253%. Looking into the 10K I learned that they had Operating net cash of 201 Million. So they are paying out less in distribution than they are actually earning (before other deductions) - this is good.
The not so good news is that they have 1.257 Billion in debt or about 24X net income. This is higher than say APU who's in the same business and who's debt is about 6X net income. Whether this is a problem, I don't know. It is about 6X Operating net cash. I guess if they get in a bind they would cut the distribution for a quarter or two (I know they have never done so), so I'm probably going to take a position in the company.
Oh, and I liked your "rodeo" comeback... very clever.
I have been in FGP for over five years and other LP's and MLP's, FGP is a very good preformer for me never missed or lowed its, divey.I don't know where you got the numbers in your post, but I don't think you know how to read a LP balance sheet or the 10-k.