I know some will probably wonder if I am not simply jinxing the stock by posting this. But I cannot help the sense that we are bidding farewell to the $2 handle on TNK shares for a good long time. Higher is the direction and I think it continues without any serious abatement throughout the summer. Just my humble opinion. Full disclosure: I am interested in selling the stock so that I can buy American pipeline interests. That coheres more appropriately with my thesis about the energy market. But I am not selling TNK shares anytime soon now. The stock is acting too well.
pb, a couple of thoughts, in no order. If the share price continues to increase, the dividend yield will look rather low. I'm wondering if the fixed payout might get raised, to keep the yield consistent at 5%
As far as pipelines, I think there question going forward is do the pipelines offer more upside than TNK?
TNK can get to $6, but can MWE get to $140? Obviously I don't know, but from my view, the pipelines have to demonstrate how they are participating in growth, whereas TNK only has to recover.
Let me take the pipelines first. I agree 100 percent. If anything, I believe the pipelines have a near correction in store. I only own EPD and I only own a very small amount. I own a much larger amount in $ terms of TNK shares. I am holding TNK now for the very reason that you have stated. The percentage upside or likely gain is much greater with respect to TNK. I see TNK having a $4 handle sometime this summer with a high degree of confidence. Percentage-wise that comes to a nice percentage gain indeed from today's levels - greater than 33 percent and a 50 percent gain at $4.50 which is very doable. The upside on TNK here is far greater. But you could say that about the entire market. I mean would you be willing to put money on the Dow, S&P or Nazdaq going up 33 percent to 50 percent plus? Not even Japan has been able to do quite that much since it began its massive move higher early last autumn.
As for the other part of the posting, I would not expect that they will raise the dividend no matter what the stock price does. First of all, I don't like the fundamentals of the business. Secondly, I don't like the balance sheet. But I certainly do know and understand that the demand for water transport has a chance to pick up significantly and increase shipping rates. That really needs to happen in a big way for the dividend to increase. But rest assured that the powers that be who control the company would raise the dividend very promptly if the cash flow revenues improve enough for it. That depends entirely on the shipping rates. I do think that fixing the dividend rate was dumb idea because as you question implies it has no meaning t say that they dividend rate is fixed when in fact it can change whenever the board changes its mind.