Okay, we know last year HGT paid out $0.732656 and year to date we're at $0.754983 and its only been 5 months, I think we can extrapolate that it'll be just under if not right around $2 for the year with the market not falling any further and making a rebound. If you buy in under $20 a share that's about if not a little more than a 10% return in a year, better than most. I'm just gonna take a SWAG and say that next year will be better, and as long as there are no major catastrophes with the market I think we could see up to a $3 pay out by 2012.
My disclaimer and position: I am not a professional investor/analyst, and I currently hold 100 shares cost averaged at $17 and change, with plans on buying another 100 next pay check. Do your own research before making financial decisions.
I refer you to McDep.com for a report on HGT. Go to the panel on the left, stock recommendations. The report will be under the royalty trust section or recent recommendations. McDep forecasts a distribution of $1.32 for the next 12 months. HGT and SJT are in two buys in the royalty trust area.
Extrapolation is not really valid.
The main factors impacting HGT revenue are production and NG price at the hub where they sell. Note that Amroys are not allowed to hedge.
Assuming production stays roughly constant (in reality it should decline slowly as the fields deplete), the distribution rates will tend to correlate with NG prices (with a lag of about 3 months).
The recent higher distributions corresponded to the unusually cold winter when NG prices spiked. NG price has dropped significantly since then, so distributions will trend lower over the rest of the summer/fall.
In trying to extrapolate like you are doing, you are essentially trying to predict future NG prices. There are a couple of analysts (Groppe, Bill Powers) calling for sharply higher NG prices as soon as this summer. However the majority expect an extended (multi-year) period of NG price weakness.
So far this year, US NG production and inventories are outpacing last year, so we are on track to see storage at capacity towards the end of summer. If that does happen then NG price will take a major hit (producers can't sell if there is no place to put it). Considering that, the price has held up not too badly thus far.
In conclusion, if supplies tighten over the rest of the injection season, then your prediction may pan out. However if production continues at current rates we will hit storage capacity limitations and NG prices (and therefor HGT distributions and unit price) will take a hit.
liza..., you are correct. I am trying to predict the future of NG, that's part of the speculation of weather or not to invest in this. I'm purely looking at the previous cash distributions, like last year and the years before. Looking at the previous cash distributions you can see that July and August are the lowest, then it starts to gain after that when the cooler months set in. This is all assuming that nothing happens and things continue on the way they are going over the last 6 months. Lets say in the perfect world it stays $0.14 pay out. with 7 months left that's $0.98, which I would guess would be in the middle of the road. One of my thoughts is with power companies changing more towards NG and moving away from coal, I think there'll be more of a demand in the near future. But from your post it sounds like you think NG could tank here shortly which would in turn make it a good time to buy HGT. Either way I'm still planning on buying more shares.
"There are a couple of analysts (Groppe, Bill Powers) calling for sharply higher NG prices as soon as this summer. However the majority expect an extended (multi-year) period of NG price weakness."
I know that in the Southwest USA, June is supposed to be extra hot this year, which means more NG use for peak power production. I just stuck my toe in the water here for 1000 shares, so I will have incentive to pay attention. With a 9% dividend, a reserve life index of around 13 years and NG prices possibly to pick up in the next 6 to 12 months (I think shale gas is overly hyped and the GOM spill will focus attention on NG as an alternative to crude), I see a good possibility for a rise in both share price and dividend. Plus two new wells online first of April should add to revenue.
I'm new to Royalty trusts...I'm retiring in the next year and moving money from growth to income stocks. My other major venture into dividend payers so far is CPG.TO, plus a small position in Petrobakken.
I've read through the website and think I have a basic handle on this entity. I was initially concerned about a multi-state tax obligation, but since I hold this in an IRA, that is apparently not a problem.
Please, can anyone puncture my belief that 9% dividend +/- over the next two to three years plus share price appreciation is solidly realistic? I am assuming we are near the bottom of NG price and that crude will hold around $75-$80 for the balance of the year.