Please let me know if I am not accounting for something when doing this but if we take the coverage ratio (0.65) and assume they reduce the dividend to 100% coverage of the past few quarters (which have been poor), then the dividend would be 0.57. At current price levels that is 8.8%. That seems like a pretty good deal considering the upside potential of the stock price if the NG markets get more lucrative (which i think they will).
What is wrong with my case here? Dillution? Rising Rates? Constructive criticism welcome.
It's not horrible at this price? No. But compared to VNR, which yields 9%, and covered both quarters that EROC missed big . . . well, I'll take VNR management any day. And for bargains, considering BBEP is selling near 11%, QRE is over 11%, NSLP is near 11% and LINE is over 12%, EROC doesn't look that enticing. I'm not sure how low it would have to go before I would be back. Maybe the $5's?
Good points. But do they have the drilling exposure that EROC does. In current environment I agree there are better alternatives but if NG prices rise in time I think EROC is better setup to take advantage of that. Same issue if NG goes down - this will get hurt more.