Need some diversification and this stock looks attractive. I'm looking at the cumulative (but unpaid) dividend as the deal maker for a 1-2 year hold. One thing I don't understand is the hedge they have on production, I.E. what type of events could force them into reorginization. Is M&A a factor in this time frame?
Any comment by the experienced investor will be sincerely appreciated.
"I wonder if you can speak to the tax issues as far as ownership dates ETC."
In general, rlbeard's post is correct re: MLP taxes. (I would only argue about his statement that MLPs provide 80% tax coverage on distribution - some are less than that, some are more - but there is no tax coverage after your basis in the units goes to zero.) As far as holding period - I think that depends on the partnership...some calculate partner's accounts monthly, some quarterly. If you happen to be holding the units through one of the times they do their "figuring", you could get hit with a tax liability EVEN if you didn't receive a distribution.
However, I'm not a tax expert, and I've only been doing MLPs for about 1 year...so...
"arbtrdr" is also very knowledgeable on MLP taxes, (and MLPs in gen'l), but I haven't seen any posts from him recently, and I recall he was going to Europe to show off his Model T Ford with a group of other Model T owners, so that might explain his lack of recent posts...
As an MLP, 80% of distributions for EROC are I believe tax-deferred until you sell the stock (so long as you don't hold EROC in an IRA or 401k). So you won't be taxed (for the most part) regardless. At least, this is my understanding. If anyone sees it differently, please chime in.
no offense taken, this is a MLP and all earnings, deprecitation, costs pass through to stockholders, so you pay taxes on earnings even though you dont get them through a distribution, it is not a dividend, the earnings are the same whether they pay them or not and therefore you still have taxes on earnings.
I would say liquidity issues would lead to some sort of reorganization. Management seems confident in their ability to produce cashflows significant enough to pay a 3% dividend and reduce debt. So, I think bankruptcy risk is low based on the conference call. Most of the beating eroc took was from the sell off of institutions and the dividend cut which led some fixed income investors to fly over to more safe investments.