At $74.92 and a $1.15 distribution, KMP had a 6.14% distribution yield. At $90.60 and a $1.20 distribution, KMP had a 5.30% distribution yield. Same company, same management, would you prefer 6.14% yield or 5.30% yield? My investing rule for KMP is 6%+ yield when I trade KMP. I use 7%+ for KMR when I invest in KMR. KMR probably hit 7% yield intra day but I thought, it will revisit 7%.
More details please? What price did you pay? Why did you get into this investment? Or was this a trade?
I use the 6-month low as a measure of the risk for my investments. For KMP this is $74.92. If you paid $90.60, the all time high, I think a good measure of you risk is $15.68. Wow, risking $15.68 on an income investment -- bad idea. Or to put it another way $15.68/$4.80 is 3.27 years of distribution at the current rate.
I don't think worrying about fluctuations like these will help you sleep at night with MLP's. Small block trades most of the day on the sell side. Large buy blocks at the close. Looks like a lot of folks panicking with the declining market. These are the times when the big money is made long-term. Market makers buy up the small guys and sell the large blocks to the big buyers at the close for a tidy profit.
I own a lot of KMP/ETP and I'm confident in their business plans long-term. I won't start to worry about them until their management fails to meet my expectations. I've been watching VNR as well and yesterday, I bought small blocks thinking that its unit price had been hurt to the point for my first entry at a good long-term distribution rate of 9.5%. I'm obviously not a trader as I'm already down 3% on VNR, but their business plan is very sound and I'll look to add to that position if the price continues to the downside. I'll watch their management of the business plan closely Q/Q and Y/Y.
My impression of MLP's is that they are sound long-term investments, if you buy them during market corrections and their cash flow is sufficient to fund further growth along with coverage of distribution.
I would not be a short-term trader, as MLP's seem to have no rhyme or reason in short-term trading patterns.
Many factors here....NG is firming in price (Chesapeake up) so volumes may decline. Note that credit spreads are widening as comedians try to push JPM's losing position down. Hedgie's trying to raise cash. Look at the big block sales that have led KMP down.
i view the price decline as a buying opportunity as it may be due to: - general market is tanking - some concerns about the health of some major natgas producers such as Chesapeake Energy. concern would be cutbacks in exploration due to lack of cash and borrowing capacity to fund it and possibly to cutbacks in production due to low prices. as a transporter, KMP would be less exposed to low natgas production if it has firm contracts, but still you can't get blood out of a turnip if any of the major producers tank and don't assume those contracts in bankruptcy.