Not sure why this would occur with suspension of dividend which eliminates the different tax treatments. Right now, spread is over 10%. Looks like an arbitrage opportunity.
Ex-Div has little to do with price movement. Look at the NAV. Its 17.25, .11 below closing price of 17.36. MORL actually closed above its intrinsic value. Simply the action of the stocks in the index which are getting pummeled by the market because of interest rates rising.
Looking at the UBS site, it shows a March 2015 distribution considerably higher than others. I understand that the amount of dividends varies by month and that they usually follow a 3 month cycle, but was this a one-off distribution or has the index remained roughly the same and can one reasonably expect a large distribution in June to fit this pattern?
Go to the UBS Website (Google "UBS ETRACS"), list of ETNS, and click on MORL on that list. Look at the tabs "Distributions" and "Components". This gives you plenty of info. Also Google "Lance Brofman MORL" on Seeking Alpha. Every month he puts out a projection of what MORL distribution may be (not always accurate) and shows you how distributions are calculated using the index components and their weights.
So using your logic, the 2008 Great Recession was the fault of Democrats who controlled both the House and Senate. Lets hear how you try to wiggle your way out of that one.
Dividend payments of MORL index components are paid monthly, in roughly 3 month cycles. Back in Feb 2014, AGNC (second largest index component) paid quarterly dividends, not monthly as it has for the last few months including Nov 2014. There are only 2 monthly paying index components and 3 or 4 quarterly paying components that affect the Feb distribution and these are substantially the same as back in Nov 2014. What is different is that the NAV value of MORL has decreased, thus forcing a rebalance of 2x leverage.
Based on normalized dividend, pre oil slide, BBEP paid ~$2 dist and avg share price of $22 around Sept 1. Question now - does oil continue to slide, move sideways or start climbing throughout 2015? Current 1.35 dist coverage good for $60 bl oil, so room for slight oil price decline with no further dist. erosion. Anything above $60 bl sends dist. and stock higher. IMHO.
That caught my eye as well. One positive is the 1.35 distribution coverage, although that is based on oil at $60. LINE at least has a better plan for handling their debt at this time.
Looking closely at the rebalance, it appears that over half of the original components have been dumped and of the new ones added, most are down today.
Looks like CEFL took major hit due to rebalancing and change in index components. 2 components were consolidated at year end and are no longer listed. Not sure how this affects index and how UBS adjusted for this. NAV down while the components listed as of Nov 2014 are virtually all significantly higher.
Looking back at Sept's $30 / share with a $2.90 dividend, equivalent price somewhere around $13. Difference is now dividend coverage at 1.2 vs 1.0 then. Also, if oil and NG stabilize and potentially rise, dividends should increase and forward looking PPS should rise.
Given the dramatic drop in oil prices, I would have thought mgmt would hold back this increase to help smooth future dividends, if needed. Sends a positive message that even with the drop in oil prices, BBEP is sufficiently hedged to protect future dividends (at least for immediate future).
BBEP issues 12% new stock that dilutes its own stock price which is used to acquire QRE stock. This happened with a similar LNCO acquisition, and resulted in a higher offer price by LNCO to offset the massive dilution of its stock.
Stock is trading at a 20% discount to NAV. Last qtr NAV increased. Just as mgmt sells loads of shares when stock price is above NAV, strategy should be consistent and they should be buying back shares at this HUGE discount. Only thing holding them back is the fact that they would be reducing their fees, so this will never happen.