BWP in Play - 4 star ranking -- obviously investors out there want a fair return on their investment
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, natural gas pipeline and storage operator Boardwalk Pipeline Partners (NYSE: BWP ) has earned a respected four-star ranking.
[Boardwalk] offers a great [dividend yield] more than twice what the S&P 500 is paying right now. It will have more challenging time raising future distributions, but its relatively new assets are positioned to generate predictable cash flows. In my opinion the stock is not expensive, and if natural gas prices don't plummet further and/or interest rates increase significantly, then [Boardwalk] is a good addition to a diversified yield portfolio.
The ex-dividend comes shortly after the anouncement, therefore you should wait to buy, or buy a little and wait for the units to drop on the ex.... I think cmlp may be better (or you should grab both)..
There have been better ways to make money from BWP than owning units.
My approach for example has been as follows.
For about the last 3 years I have been continually short ($25) BWP puts. The number of puts is about the same as my standard position when I own units. Every quarter I have rolled forward the puts for additional time premium. The amount I get each time I roll forward is roughly equivalent to the amount unitholders get as a distribution (not surprisingly since the distribution amount is baked into the put premium). So for a number of years I have collected the same cash return as the unitholders without ever tying up my funds by buying a single unit.
The advantage unitholders have over this strategy is that they get tax deferred distributions whereas my premiums are STCG. However I actively harvest tax losses to offset them and haven't paid any CG tax in years. Of course, I was able to harvest a lot of tax losses in 2008-9 by switching investments at the bottom of the market. More recently I tend to use ex-Canroys which are great for tax losses because they seem to never stop dropping ;-) Typically I double my position, then after 30 days sell my original position to avoid the wash sale rule. Thus I convert an unrealized loss into a realized loss and a lower cost basis while never missing a dividend (in fact I get a double dividend for one month). Then another 30 days after the sale, I sometimes add some more lower priced shares to increase my position. This gives me tax losses which I can use to offset the puts premiums which I continually generate so I never pay any taxes on them.
I've been doing this not just on BWP but on a bunch of high yielding MLP investments with little growth. If they are not growing (like BWP) and unit price is not rising then the return is just the distribution. And I can capture the equivalent to the distribution in this way without ever having to tie up my money buying units. Instead I buy units in the one which are growing and so offer a higher total return including unit price gains and use this puts strategy on the low growth/high yield ones. In this way I collect 'distributions' on many more MLPs than I actually own units in and so significanyly boost my posrtfolio income.