% | $
Quotes you view appear here for quick access.

Inergy, L.P. Message Board

you are viewing a single comment's thread.

view the rest of the posts
  • wareham2620 wareham2620 Dec 1, 2009 12:29 AM Flag

    NRGY vs SPH

    First of all I would like to thank you for your response and advice.However,I've already sold part of my NRGY and bought the SPH.
    As for T,I also sold some of my T and bought VZ .
    I made a very poor trader ,so I'll pass on the call and puts.

    I've just been buying and holding dividend / distributions paying stocks.I own many stocks and have held them from the top.I placed them into the reinvestment plan and hoped for the best.Some have stopped their dividends / distributions and or cut them.I guess I should have sold them at that time.But I didn't ,I still hold them.

    My MLP's
    ARLP {LP)7.51% Industrial Metals & Minerals
    CPNO (LLC)11.32% Natural Gas .No longer raising distributions .
    MMP crude oil.6.94% Also no longer raising distributions .
    EPD Diversified.7.24%
    NRGY Propane.7.93%
    SPH Propane.7.45%
    CLMT Oil & Gas Refining & Marketing.10.17% Cut back their distributions.
    FUN Amusement park etc.likely suspension of its dividend beginning next year.
    All have upward sloping chart except FUN.But in the long run I think fun will make it.
    All of the above had raising distributions when I bought them.

    My portfolio,the good,bad and gone.


    Well thanks again and I will try to focus on Distributable Cash flow or DCF per share and the coverage ratio of DCF to the distribution.

    Best of luck to all.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I just wanted to add a couple of points to the discussion here. First I wouldn't worry about the MLP's that have stopped raising distributions. The fact that they have avoided cuts during the worst recession in a long time is a pretty good sign of a competent business plan and execution by management. They will raise distributions sooner than you think. Think about XTEX, APL or EROC holders who've had their distributions cut to zero or near zero, but may still have tax liability to pay at tax time. I actually think your MLP portfolio is pretty good, covering a good range of MLP's, I hold many of those in your portfolio and have very good confidence in them including the ones that aren't rasing distributions at the moment. CLMT and FUN are a little on the outside; not typical investments for the MLP sector since the need for their business isn't as stable as a long haul pipeline.

      DCF is important to understand only to the extent that MLP's can payout more than their earnings because their tax structure allows the unitholders to benefit from the depreciation and depletion allowances that normally are calculated at the corporate tax level. Also I see the DCF coverage ratio as a barometer of a potential cut for a MLP rather than showing the potential for a distribution raise. Many MLP's have a specific ratio in mind and even if they could raise the distribution prefer to keep it at a certain percentage target. DCF growth is very important but you can sort of track that through the distribution growth since they are implicitly related.

      Also pertinent to the topic: If you are building a income producing portfolio and are reinvesting the dividends or distributions three factors determine your overall payout: the starting yield, the distribution growth, and the growth in the share price. In your example comparing SPH and NRGY, NRGY offers a slightly better starting yield but has handily beat SPH raising their distribution 9% a year over the last 5 years and SPH only 6%. If we use the current starting yield of each, and calculate each continuing their 5 year distribution growth, their share price growing at the same rate as their distribution and everything reinvested, the difference is significant. After 5 years NRGY's distribution yield on the original investment would be 18.1%, SPH's 14.4%. After 10 years (this is stretching predicting this far out) NRGY's yield 40.1%, SPH's 27.2%

      Although the website you reference seems to predict faster growth from SPH that advice is from analysts who are frequently wrong in their projections. Just comparing those these two NRGY has proven to have a business model that is growing faster. They are branching out into other areas other than the pretty slow steady business of propane and have been raising distributions even when the recession was at its worst. That to me is the sign of an MLP that I would want to be in at this point.
      But just remember that when dividend investors say that starting yield doesn't matter and that dividend growth is the most important thing that's incorrect. They both matter in conjunction with fluctuations in the share price.

    • I was heavy on AEE.then I sold when it looked like a problem,however a year or so later I thought they weathered the storm and bought back into it then last March they cut their dividends and I took a beating by almost 50% value I bought CTL with the money just to maintain my income but I did not have confidence that they would maintain thier dividends so I switched to MWE and Teppco,to keep my dividends,I also had a smaller investment in PFE and sold that when they cut dividends so cheer up we.ll all be dead soon