Well it doesn't lie in the longer run, but it is prone to fake moves at the hands of the robot traders. The question is whether the next economic stats will push the yield below the lower support around 2.47%. That level has held, more or less, on 4 occasions going back to Jun 2013.
PAGP announced an increased dividend. 7.5% over last quarter and 23% over the initial rate. I chased it last week and will be looking to add more if it goes a little lower.
The MLPs have been strong over the last few weeks so they should be pausing and pulling back a bit. But the distribution increase announcements are coming.
That has to be the silliest post of all time. Why would CHK spend money that it doesn't have to buy CHKR shares that are trading for more than they are worth? You might think that they would do so in order to get the 23% "dividend" except that that dividend is not going to continue at the present rate forever. You say "that is what appears to be happening" but if CHK was buying any shares of CHKR under Securities Exchange Act rules they would have to report those purchases within 2 days. The fact is that CHK is carrying its 23.6 million units in CHKR at $174million (see their 10-k). Do the math.
Gambler, I understand where you are coming from, but I disagree. The economy is just not strong enough despite headline news of jobs (the bulk of job gains is still part-time). Plus there is still no wage inflation. We will see when the next economic reports come in. High food and gas prices will keep the consumer under wraps.
I agree the Fed is in a box of its own making. Inflation is up no matter what the adjusted stats say. The Fed says they want inflation, but once inflation starts, you can't stop it unless you jeopardize the entire economy with a recession.
happy 4th to all.
Stagg, I think rates will decline again after this recent increase, once it becomes apparent that the economy is slowing again or at least not growing fast. Goldman just cut their Q2 GDP forecast. Plenty of articles on different blogs that look into the different reports and provide a less than rosy view of the economy.
Sarge, a couple of points. First, the headline numbers always move the robots that trade Treasuries. The 10 yr jumped but ran into resistance at the 200 dma at 2.69%. We will see next week if the market really believes that the jobs number means the economy is getting stronger. The jobs number included a DECLINE in full-time jobs and an increase in part-time mostly low wage retail and hospitality jobs. The participation rate is still at all time lows. And the birth-death model added 121,000 jobs (yes the BLS is not real actual job info, but a model). With rates increasing, one would have thought that the nonagency mREITs would rise, so this tells me that the story of a stronger economy has some holes, although the initial rise did hurt agency mREITS somewhat.
I think interest rates remain in a range. Strong economic stats push rates toward 3%, but weak stats push them back down. The next GDP estimate is due at the end of July. The leading indicators number is due in mid-July. Read an article yesterday that said there was a lot of inventory accumulation in the first quarter that is not being worked off, thereof producers will have to cut in upcoming quarters.
I am looking to add more WMC, maybe around $13.50 if it gets there or if rates get closer to 2.8%. Also going to add some closed-end muni funds in here as they dived with the jobs number and are now approaching oversold RSI levels.
Jack, you are right and you didn't even mention the stats that showed full-time jobs fell while part-time jobs increased. Then there is the birth-death model adjustments which added 121k this month. But as I predicted, the 10 yr rate initially rose from this headline and ran smack into resistance at the 200 dma at 2.69%. We will see if the market really believes the jobs report indicates a strengthening economy. WMC is holding in there considering the headline news.
I've owned AR since last year. Should have bought it when it came public in the $40's. Because I also own EVEP, I was following news on the Utica/Marcellus shale area and they were always mentioning Antero as having huge acreage with great potential. AR should get a pop when they bring their midstream unit public as it will bring out the value of that unit. Not sure if AR will spin off the remaining amount that they own. You can view their S-1 to see the growth in the midstream unit. My one concern is that the entire midstream sector has gotten very popular and the IPO price might get pricey.
SArge, the Elba Island news was already well-known and revenues from it are still a ways off. EPB got oversold after their distribution guidance was flat. They got a bump from all of the LNG news because of Ukraine and all of the other LNG plays. But MLPs move based on distribution growth and EPB's will be flat. Still, you get to collect a good coupon while you wait. But it's not going to be a rocket like the gp's that I have mentioned.
Don't know if you saw this, but there's an item about Antero's (AR) wells in the Utica. Mentioned as among the best. They are IPOing their midstream unit, probably in August. The midstream unit has a water disposal operation for fracking. Their growth will be huge. Don't know what the initial yield will be yet, but don't let a small initial yield stand in your way.
Agree that everything LNG appears a little frothy. But wait to late Fall when Russia turns off the gas to Ukraine and everything LNG will get another push.
The dividend news is already old and the book value and earnings have probably already (or should have) been priced into the stock. With the next dividend still a long ways off, I think WMC moves inversely with the perception of the economic news. If it looks like rates are going up, then the stock will decline. Jack is probably right about what's really going on with the economy, but the trading robots don't do analysis, they just trade the headlines and the headlines don't delve into the numbers, and don't separate the model-based from actual.
Bob, this is a difficult question because there is real actual impressive growth going on in the shale areas that is leading to increased profits and increased distributions. But there is also yield chasing in the entire stock market. As long as the distribution growth can continue, then I think those MLPs will continue to perform at least as well as the market because there aren't any other sectors with outsized growth potential to attract investment dollars away.
The only thing that I can say is to keep an eye on the charts to see if certain names go parabolic or if they start to roll over.
goldman downgraded EPB to sell and a $33 price target. I have owned it for several years but sold covered calls on it because I didn't think it could increase much without distribution growth. Distribution growth wins over yield.
Bayman, rates have ticked up a bit since their earlier low of 2.45% (now 2.56%). That and some comments from Fed governor Bullard that the market is ignoring that the Fed might raise rates sooner rather than later, plus hopes that the economy may be stronger in Q2 are impacting WMC. Any good jobs report news will keep the pressure on rates moving up, but I don't really think the economy is strong enough to push rates past 2.85%.
I think the best way to play WMC is to wait until rates reach a short-term peak. We seem to be trapped in a range of 2.40% to 2.85% but I think there's more chance that the lower bound breaks before the higher bound.. The 50 dma for WMC is at $13.74. Of course, global events could also put downward pressure on rates.
I think WMC put in a good quarter and the 67 cent divy was a surprise. I would buy more if it continues to drop, assuming that the economy doesn't get stronger.
Rates are up a little bit and that could be the reason for the small selloff in WMC. There is risk that we could get a headline number that makes the economy appear to be strengthening. If the robots that are in control of trading read the headline as meaning there is a stronger economy, the 10 yr rate will increase and money will flow out of mREITs like WMC and into nonagencies. We will see when the Q2 GDP estimate comes out on July 30. No doubt it will be spun that the economy has rebounded from the Q1 weather-infected downturn. However, I don't think the 10 yr can go much over 2.85%. But that is 30 bps and a rise of that amount would take its toll on WMC. It may be best to be opportunistic when playing WMC.
Sarge, I already own it at $36. It came public at $26, but I refused to buy because I thought the yield was too small. Lesson learned. When a GP comes public, you buy. End of story. Finally picked up some of Ed's PAGP today which is the GP of PAA. Again, this came public around $22 or 23. I mentioned it a few weeks back at $27 after listening to the investor call for PAA. Ladenburg just put a target on it at $36.
As for the blow off top, we won't know until it comes. GoPro is up 100% since its IPO in 3 days. So there are many signs that things are in a bubble.
Stagg, the only thing that I can think of is that CEFL is based on the return of closed-end funds (CEFs) and that is a particularly nuanced asset type that probably does not attract as many investors as the investments on which DVHL is based. Just judging by the discussion on message boards, there is a lot more interest in BDCs, mREITs, and MLPs than there is on CEFs. Also, as we have discussed, even comparing stocks in the same sector, the highest yielder does not necessarily produce the highest total return. For example, many of the agency mREITs started to lag behind the nonagency mREITs because investors thought that rates would rise and hurt agency MBS, but help nonagency MBS ( because nonagency MBS are viewed as a credit play). In the MLP sector, those MLPs with growing distributions have performed better than those that have stagnant or smaller increasing distributions.
WGP announced an offering by its sponsor Western Gas Resources. These are shares being sold by Western Gas Resources (owned by Anadarko) so there is no dilution. Those looking for a GP to invest in may want to consider this after the offering settles. t has been a rocket, going from $36 to $62 (before the offering). Stock was overbought, but if it dips to $58 it will be right back on its trendline.
Could not stand it any longer and had to buy HCLP, a frac sand MLP. I've been watching it since May but refused to buy because it violated my rule for not buying when the RSI is over 70. There were a few times when it corrected, but I didn't buy. EMES, another frac sand company, went from $45 in March to $105.