I'm as bullish as anybody, but I don't think you will see a 4 percent yeild in 2010. I do expect $8 in dividends. I think a five percent yeild is likely giving you a share price of $160. I think in 2010 interest rates will be higher and growth prospects will be lower with a company twice as large, resulting in a lower yeild. Still its is a no brainer here to me, and I would be buying if it were not already such a large position.
The tax, which they are not paying now, but they will be paying in 2008 at a rate of 24% will be eating up a lot of the cashflow increases. I wish they would have taken a page out of Kaneb's book and had converted to an LLC.
I am looking to buy more shares, but there are a couple of unknowns right now: (1) the price of the new shares they will be issuing and (2) the next Yorktown distribution, which should be some time in the next 30 days. That tends to have an overwhelming effect on the stock and with the recent run-up, who knows what it will be.
Probably would have been better as an LLC, but remember they've been reserving as if they were taxed at 23%, so the incremental effect shouldn't be large. Is it still possible to convert?
Also, I wonder if the Yorktown distributions will continue because mgmt and the board were planning on purchasing some of the equity. Yorktown's Founder/Sr. Manager, B. Lawrence is XTXI Chairman. It wouldn't make sense for him to be issuing distributions to investors while at the same time buying equity.
I really don't expect any pullback from here because the value shot up with this deal. If it hangs around pre-deal prices while XTEX is up 7% or more, there are a lot of people sleeping at the wheel. There might be some confusion following the announcement, but I'd be working night shifts for cash to buy shares if it fell below $75.