3% share Price Increase In The Last Month.
On Nov 5th ITI's price was $2.09 Accumulation appears to be continuing. The next earnings release will probably be pivotal unless we get an announcement of another decent size contract.
ITI has no debt. It is profitable and growing. Management has been using the excess cash to continue buying back outstanding shares. Thats a proven formular for success. Patience will be needed to win this battle.
The question is how much do we want to pay for a growing mostly tax deferred $2.49 annual distribution. The value behind each unit remains the same whether you pay $29 or $28 or $27 for that income stream. The lower you pay, the higher your annual percentagage return is. The higher the price, the more you can sell your units for at the time, which will require you to pay more taxes, and lose you the growing income stream. To replace the income stream you will then have to invest the (net after taxes) cash in something that will probably be risier to replace due to the lower cash invested. The income would probably be harder to replace because what you would probably want to buy wou be elevated in price just an VNR would be to entice you to sell in the first place.
IMHO VNR is a growing tax sheltered income investment first, and a capital appreciation investment second. To take advantage of the growth of the capital appreciation I would have to sell my units and destroy my position and pay large taxes and lose the tax sheltered income which is why I invested here in the first place for.
The taxes would never have to be paid by me or my heirs if I don't sell and pass the investment on to my heirs with the income stream intact
Unless you run into a UBTI problem. The possibility is that we might be dealing in murky waters.. The reality is investors should be aware that putting an MLP in an IRA is not the same as putting it in a taxable account.
We all know what happened on the other side of the coin-Back in 2008 when they cancelled the dividend and the disruption that was caused by the panicky departure of the income investors until the price dropped low enough for the value investors to step in.
It is possible that a similar(but not as drastic) reaction takes place if the growth investors feel the growth phase is over upon the declaration of the dividend and the income investors wait for a lower price so the stated dividend gives them a higher return. There will probably be a lot of volatility.
Another point I don't think anyone has discussed here or possibly even thought about.
Value investore will only buy shares based on their guesstimate as to how much NAV is higher than the Share price ACAS is selling for. When the SP gets closer to NAV they will take profits and leave the last few per cent to NAV leaves no room for meaningful growth going forward. Share price is currently $15.29 and NAV is $19.54. That is a 21.75% discount to NAV.. What value investor wants to buy as we get closer to NAV? Nobody unless they buy back more shares and raise the NAV per remaining share. In theory we will never reach NAV until all the shares are bought up except the last ONE SHARE.
What value investor will buy as we get close to NAV. I'm saying at a 10% discount or less.
The catalyst might be using up all losses they can and/or buying up the limit of shares they are allowed to do. Then something else has to happen. It isn't clear to me currently what that will be.
It's not that I think "the return rate will not be feasable" Its human nature -Management will start by paying a smaller dividend than they could--because whatever it is investors will want more. To allow them room to increase the dividend going forward will mean a smaller dividend to start. Lets say the stoct price is $25 and the NAV about $26-7 and they declare a quarterly dividend of $0.60 that would be almost 10% and probably difficult to main and/or increase. The dissatisfaction would come the following quarters if they can't increase the payout.
If they start paying at $0.40 quarterly they could probably be able to increase later but at 6.4% it's not attractive in the BDC sector these days. (ACAS has a history of paying over 10% in the old days) And if interest rates will
be rising its a further negative. The current ACAS investors talk about resumption of dividends but I am beginning to think they won't be happy with what they get, when it happens. We could have a mass migration out of ACAS by the value investors as they get replaced by income investors. And they will probably be attracted by a falling price and the indication of a rising dividend return. I don't know what will happen.
It might be the right move to continue buying back shares and at the same time instituting a very small dividend. Maybe $0.01 or $0.02 and raise it a penny or two a quarter until they are ready to slow down or stop the share buyback and increase the dividend more meaningfully.
By doing it this way the growing cash dividend would attract the income investor with a growing dividend and keep the value investors as they see the shrinking share count , increasing NAV and increasing dividend.
Any thoughts out there-either pro or con?
Big positions are in the process of being built going forward to the next earnings release probably somewhere in late January 2014 or February 2014. We could be close to $3.00 or possibly over by then.
Patience and buying probably will be the best move untill then.
Just put an order in and buy it. 5 yrears from now, it won't really make a difference what you paid for it. It will make a difference if you get too cute and miss the buy by a few cents on a limit order and then get stubborn.
They did not file a secondary. It was a shelf registration to be used in the future as needed and to be sold at the then current market prices.
Everone is expecting the resumption of cash dividends to be the catalyst for a rising stock price going forward from that point. I believe that when ACAS starts paying cash dividends there will be an opposite effect on the shareholders. Expectations will be high and whatever they pay will be looked upon as not enough and therefor a negative. The current ACAS investor is looking for increased NAV, and the catalyst is buying back as many shares as they can to reach that objective. That will increase the NAV and help drive the price up towards the ever increasing NAV per remaining share. I believe the resumption of cash dividends will give the impession of the end of the growth phase and the start of the income phase. That is for a different investor and will cause the changing of the investors to new ones with different goals
Patience on your part will pobably do better for your portfolio performanae than managements declaration of a 2 for 1 split..
If a split was really better, why not a 70 for 1 split to bring the price down to $1?
. That would really juice up the price
I guess I qualify since I own MWE for more than 10 years. I assume you are interested in MWE's options. The potential gains with options are much greater than the underlying security (as well as the potential losses) because you not only have to figure out the potential but also the timing. For me, I find it too difficult to time prices. With options you may be right with the trend but wrong by a day and lose out.
I'm sorry, I can't give you an answer. My best guess is that down the road MWE will be much higher. Higher than now, and I believe the distributions will be higher, much higher than now. But when? I take it, day by day.
I have a position in PSEC for about a year. I am dripping the dividends into additional shares and I am also adding on dips with available cash from time to time so it is beneficial to me for the stock price to remain close to current levels. The dividend rises each month for each share I own, and since I have more shares each month the dividend dollars that get dripped keep rising into still more shares. AND EVEN MORE SHARES IF THE PRICE REMAINS AT THIS LEVEL OR LOWER. As long as management keeps on the right path and doesn't do anything stupid, I am making more money at current stock levels by continuing to bulk up my share count.
FYI my current cost basis is $11.09. And on Dec 19,2013 I will have another chunk of money that will be dripped into still more shares.
Nothing to do here but wait.
I think the goal should be to make money. That means not incurring unnecessary commissions, additional unnecessary current taxes, and another opportunity to be wrong in your timing if the market doesn't do exactly what you want it to do at the exact time you want it to do it..
I find it best to do nothing most of the time except wait, and wait. It's something called patience
IMHO there are only 2 reasons it would be OK to buy in an IRA.
1) You only have available funds to buy in the IRA.
2) You realize you are giving up valuable tax benefits by doinfg it.
In a non-IRA account the bulk of the distributions are basically a return of capital and reduce your basis so they aren't income and shouldn'rt be taxed at all. In an IRA it is lumped in with other un-taxed funds and bulks up your IRA which eventually will be taxed to you at your highest taxable rate when they are withdrawn or will be taxed at your heir's highest rate when they are required to start withdrawing funds the year after your demise.
Liza, I don't know how old you are--but at 70 1/2 you will think a lot differently about your IRA. It builds up the estate tax obligation and then it will be taxed after at the highest regular rate you (or heirs) reach. The real sad part of it is. The bulk of the distribution was a return of your own money and shouldn't have been taxed in the first place and definitely not twice. Thats adding insult to injury.
. No point in selling and creating a taxable event and at the same time giving up the mostly tax deferred distribution that keeps rolling in month after month and I keep dripping the distributions into additional units, so each month I have more units to receive more distributions going forward. Actually a lower price would be more benefial to me as I would receive more additional units with each distribution at a lower price.
Warren Buffett said you only benefit from a higher security price if you want to sell it. If you are buying you benefit from a lower price. Price is what you pay. Value is what you get..
The long term value of each unit of VNR is the same no matter what you pay for it. If you are buying you get more value if you pay less per unit, and I'm buying.
Do you look anything like Maria Barteromo? They might have an opening now that she left. Give them a call, tell them I sent you.
-- in the catbird's seat. ---
Memories of an Ol' Red Barber recreation teletype of the Brooklyn Dodgers away games way back in the '50's.