Sarge, this is where you have to be careful with some high yield stocks. Some companies without any growth just start paying out more and more of their cashflow. In essence, they become almost self-liquidating. Sometimes they start issuing more and more debt so that they can continue to pay the dividend. You find this in companies whose business is in decline from new competition or new technology. Ptiney Bowes comes to mind. Usually they end up cutting their divies, sometimes to pursue new growth strategies which ends up being good for the stock, but usually after a decline. Bottomline, you have to believe in the business to want to own part of the business.
doneby, as you may know from my postings, I try to study charts to find patterns. While they are sometimes hard to find and sometimes contradictory, they seem to be more reliable than other metrics. The problem with charts is that correlation doesn't mean causation, or in other words, is the chart a predictor or anticipator, or is it a backward reaction to fundamental news.
Looking at the S&P chart for the last year, it is in an upward trend channel of approximately 125 points in range from top of the channel to bottom. Looks the same for the 2 yr period. The index has stayed in this channel. Sometimes it has gone sideways for a while and then breaks to a higher level, but still within the same channel.
You have heard all of the reasons for why a correction is probable. But with everyone expecting one, it doesn't come. The charts show that there is still room to move up to the top of the trendline.
I continue to look for opportunities without chasing things that have already moved up, but I'll also sell some things if I have a profit.
The components of the distribution are production, price of commodity and number of units. Production has been in decline and there are no new wells. Nat gas prices declined from the winter spike. The number of units that will share the distribution will increase because of the end of the subordination period. This should be no surprise as it has been disclosed. But one never knows whether the market has already factored it in or whether some yield chasing algorithm thinks the distribution is fixed.
Frontier and Windstream used to pay high yields and many chased them because of that. I think they both ended up cutting their dividends, which is a lesson why it is important to research the sustainability of the business line that produces the income that pays the dividend. On the other hand, these rural carriers used to be in areas without much access to wireless, cable and satellite. Don't know if that is still true.
On a separate note, I looked at AMT a few months back (a REIT for cell towers) after a Barron's article. Still going up. Wished I bought some.
Ok, then watch MTGE when it reports tonight. The point was not to compare exactly similar mREITs, but to compare the market reaction to the stock price after a better than expected quarter. BTW, AGNC bought shares in a bunch of mREITs, so they are not exactly a pure-play agency mREIT either.
Saw an item on Iron Mountain (IRM) the big file storage company. They are converting to a REIT and will announce their dividend schedule with today's earnings. They have a presentation on their website with the metrics of all the different REIT sectors. Basically, they are trading at 11 times AFFO and most of the REITs trade at higher multiples. Self-storage REITS trade at 22 times AFFO. They may pay a dividend of a bit over $2 per year. At a 4% yield, that would equate to $50. All the REIT funds would likely add it. The stock popped at the end of June and is now no longer overbought. Could see some appreciation when the funds start buying it.
But that news may already be reflected in the stock, after all they did already pay the divy and announce the book (as of end of May) so I doubt there is much surprise left in the earnings report. As an example, AGNC reported good numbers yesterday and after a bounce on the open, it sold off and is down today, no doubt because of the strong "early" GDP report. Not sure if the other mREITs are having the same market reaction as they report their earnings.
With the strong GDP report, the focus may be back on the Fed and bets on interest rate direction at least until we get some economic report that shows the economy is not getting stronger like the inevitable downward revision to GDP. The 10 yr rose back to the 50 dma.. It has broken through that level before but then ran into the 200 dma. And back and forth we go.
Gambler, why ARR over WMC? WMC is yielding 50% more. I think they got punished for a bad end-of-year (paying the dividend in shares) and a sloppy SPO.
Jim Grant was on CNBC yesterday saying that Russia was undervalued. There are all sorts of ETFs to play it including triple bull and triple bear ETFs. At some point there could be an opportunity, but who knows where all of this is going. 100 year anniversary of WWI has too many parallels.
Ed, you couldn't stay away from coal. Looks like the distribution is safe and some upside potential. But that sale of Utica properties is going to result in a gain that shows up on the K-1. Wonder if that shows up if you didn't own as of the sale date.
This should bode well for WMC. If you like AGNC with an 11% yield, you should like WMC with a 19% yield selling with a 10% discount to book. I think WMC reports in a few days so let's see how AGNC trades.
The other big upcoming event is the release of the first estimate of Q2 GDP number tomorrow. The Bloomberg consensus has a return to growth of close to 3%, but economist Gary Shilling went through the different components using figures already reported for retail sales and exports from April and May and he predicted that the number will be closer to 1% and a possibility of a negative number. Needless to say, the numbers are always revised and the revisions are lost in the news clutter. If the number comes in close to the 3% estimates, I would expect Treasury rates to rise, but since that GDP number is probably overestimated, that could make a good entry point for fixed income products. If the number misses the estimates, the agency mREITs should rally. The 10yr Treasury is sitting on support around 2.43% and a lower GDP should cause it to break lower to the lower bound of its channel.
I don't think the delay has anything to do with it. Some times they have released on the 24th or 25th and some time on the last day of the month. This quarter is the first without the subordination, so the number of units will be 28mm. If you use last quarter's revenues divided by the new unit amount, the per unit distribution will be 32 cents. It could be lower if the revenues were lower.
The pattern on CHKR has been to begin a "dividend run" some 4-6 weeks before the announcement (next due in mid Aug). It is a little like musical chairs as most quarters the stock has fallen back after the ex-date. For the most part, the "traders" are computer programs. So I don't think this means that there is some new good news but just the normal quarterly pattern. I will note that back in the spring many were proclaiming that the spike in nat gas prices would hold (and propel CHKR upward) but I read that nat gas is back down under $4, but the rises are newsworthy and the decreases ignored.
Also, it was pointed out previously by another poster that CHKR is short oil, and based on my reading of their derivatives in their SEC reports, I believe the same thing. Most investors in these royalty trusts probably think royalty trust means "long oil" so they buy when oil prices go up. The subordinated distribution protects the distribution so they don't even bother to read the 10-Q that discloses the loss.
SDT was due to report their next distribution, the first one without their subordinated level. It should be significantly below what their last distribution was. Yet that stock was up last week. The market is efficient in the long run, but in the short run, investors don't always appreciate the weakness in their investments.
I own the ATLS/ARP/APL group, EPB and ETE. But full disclosure for those that hate to deal with K-1's, if you own ATLS, you have to report its holdings in APL, ARP and ArcLogistics and another entity separately, even if you also own positions in ARP and APL. So for my positions in ATLS, ARP and APL, I have to report 7 K-1's.
Similarly if you own ETE, you have to report separately its ownership in ETP, RGP, and SXL.
Is it worth it? I have over a triple in ETE, a double in each of APL and ATLS and the yield on cost basis is in double digits for each.
Now if they could only get rid of Zacks. TheStreet, Wall St Cheat Street and Motley fool. but then they would probably charge us.
Why is the price appreciation part unjustified? With MLPs, the market pays for distribution growth. That's why the MLPs with the higher yields but no growth do not have much price appreciation while those with higher growth/lower yields have the best returns. You may not think it is justified, but it is what the market thinks that counts. An example of this is EPB. When KM announced that their distribution would be flat back in March, the market took 10 points off of the stock.
Sarge, I have owned the entire Atlas complex -- ARP, APL and ATLS, but they have lagged their competitors. There is certainly potential to catch up to the rest of the sector if they can execute. Either they execute or someone will come along who can bring about that execution. Seems like a no lose situation, but you can wait for a long time for either the better execution or a buyer to materialize, and there is no guarantee that either will happen. The downside is that the Cohen's are buyers instead of sellers and they overpay for acquisitions which keep them from executing (some said they overpaid for some of their acquisitions at APL).
Let's see how the market reacts to yesterday's distribution increase at ATLS.
Most of us have a limited amount of funds so these choices can get difficult especially when you see some stocks increasing at good rates while others remain stagnant waiting for a catalyst..
Keebon, I don't follow the marine MLPs, maybe because of my past bad experience with dry-bulks. I note that CPLP has had a nice chart over the last 2 years. As for the IDR deal, you can bet that the deal is to benefit the general partner but that doesn't mean that the MLP won't also benefit in the short term. The GP is going to push to get to that high IDR level which is at a quarterly distribution of 29 cents, which is some 25% higher than their current rate. The questions are how long does it take to get there and how does that compare to the distribution growth at other marine MLPs.
Well of course they are going to pay the distribution because that's what the subordination level is all about. As long as they delay finishing the amount of wells that they were supposed to drill, the subordination level stays in place. But keeping the sub level in place means that CHK continues to get a zero distribution on its subordinated units (because the old wells don't earn enough to pay the subs) which can't be what they planned when they created this trust. At some point, CHK is going to want to get some distribution, but at current production levels, they are only going to get a distribution if they finish the wells and convert to common units. Once their sub units are converted, then there are more total units and the per unit distribution amount will be less (because the new wells are not making up for the decreasing production on the old wells). Interestingly, CHK is carrying these units at a $7 value (you can find this in CHK's 10-k), but the market doesn't seem to realize this.
A possible comparison is to watch SDT. This next quarter for SDT will be the first in which its subordination level ends. They should announce their distribution today. Last quarter, they paid 42 cents on 21mm units, but will have 28 mm units to pay this quarter. If my math is correct, their distribution should be reduced to 31 cents. Let's see how the market reacts to this reduction. Maybe it's priced in.