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.
You do realize that this is an MREIT that is required to pay out 90% of its taxable earnings in order to avoid taxation at the corporate level. That being said, taxable earnings are different from GAAP quarterly earnings so don't get alarmed if it looks like they are paying more than their "earnings" in their quarterly reports. Many mREITs report "core earnings" which attempts to eliminate some of the accounting entries.
As for the safety of the dividend, an mREIT earns a "spread" equal to the difference between what it earns on its assets and what it costs to finance them. Multiple the spread times their leverage times their book value and that gives you an idea what they are "earning" to pay the divy. The spread can change, but they also can adjust the amount of leverage that they use. mREITs that use more than 8 times leverage can be at risk of having to cut their dividends because if the price of their assets decline, their lenders issue a margin call.
If they are providing the appropriate guidance to Wall Street, then everyone should know what their spread is, how much leverage they are using and what their book value is and there should be no surprises, even if the dividend fluctuates. mREITs get hammered when there is an unexpected decline in the dividend.
I have owned NYMT since the last spo because it is performing. But they are investing more and more in subordinated CMBS and mezzanine loans. Those assets are hot now, but their prices can be volatile and plenty of mREITs who invested in those assets got burned during the last crisis.
You might want to take a look at the charts to see how MMP has compared to KMP over any period. I think the difference over 5 years is some 300% (based on Yahoo charts). That 4% difference in yield (which by the way is the difference today and not a difference in original cost basis if one had purchased 5 years ago) doesn't seem to make up for the difference in stock price performance.
You are wrong. Never trust Yahoo Finance info. Look at the EPD website where they show that in fact the distribution was adjusted for the 2-1 stock split back in 2002.
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.
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.
Sorry, but I didn't read in their disclosure that bad weather effected their production. I think the lower production was just a continuation of the the trend. Since the subordination period ends by the next distribution, you can expect a lower distribution as there will be more regular units and no subordination threshold to bolster the distribution to regular unitholders.
Aubrey's new company announced a large purchase of acres in the Permian and the Marcellus. Looks like the Marcellus properties went for well over $20k per acre. Jefferies was the investment banker on the deal.
On a separate note, MHR has a slide in their presentation materials that shows the value of each company in the Utica based on their $ of their market cap per acre of Utica The lowest $/acre of Utica properties is EVEP.
Looks like the recent rate rise may have run into resistance. Rates had been falling on the softer Q1 economic activity that was blamed on the weather. Reports are that the big institutions are short Treasuries betting that rates are going to rise with all looking forward to this Friday's jobs number. But the ADP jobs report just missed. However, there have been many times that the ADP number has been different from the unemployment report. Who knows? If Friday's number disappointments, rates should fall as all of those short finally cover. Even if the number comes in on target, I don't think rates can rise over 2.8%. There is some evidence that the economy is already slowing.
I have no idea how this will effect stocks this time. Normally falling rates have been good for stocks, but we are at the point where stronger earnings were supposed to take over. During all of June, the Fed won't be buying any Treasuries on Fridays to help prop the market up. Today's WSJ reports that the Fed is concerned about chasing yield bubbles as twice as many junk bonds have been issued than at the market top in 2007. I have been wrong too many times trying to predict a correction, but if a selloff should occur, it is easy to see the factors that contribute to it.
Sarge, if the jobs number (no one gives any credence to the unemployment rate as those numbers are "modeled" and don't reflect the real economy) does not come in stronger than 300k jobs, rates will fall lower. Reports have it that many investors are short bonds hoping for rates to rise. Who knows which way it will go, but if the jobs number disappoints, there will be short covering that drives rates even lower.
On NYMT, I bought it after their last spo and intend to sell out on the day before the ex-date. They will most likely do another spo after their next ex-date and then I'll decide if I want to play it again. It's RSI is getting overbought (now over 70) but last quarter it ran up into the ex-date. The top to bottom swing was $1. While it is hot and still likely to run up (the long term chart seems to be establishing a higher channel). longer term one must remember that mREITs are not long term vehicles. NYMT once traded over $80 before it collapsed during the last crisis.
Vin, I was thinking of the same thing earlier today but decided to hold on and try to buy one more time after the Russell rebalancing The fear is that we get a full market correction before PSEC can eventually recover and I end up with too large a position.
I have the same dilemma with some underperforming MLPs that don't seem to be doing much (CMLP and EPB) but with my luck, as soon as I sell, they will be taken over. I can't sell too many MLPs in any one year because of all the ordinary income.
On a separate note, I made a timely buy on some closed end muni funds last year. Many of these are still selling at 10% discounts to NAV and yielding 6%+ tax free. They got hit a bit today as the 10 yr rate rose to 2.6%. If rates rise to 2.8% after Friday's jobs report, I will buy some more as I think the economy is going to slow again. If we get a bad jobs number, I'll buy more immediately as rates could fall back below 2.4%.
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.
I'm going to put my contrarian hat back on for a second. This is starting to look like a blow-off top to me. It resembles past action -- the frenzy surrounding IPO's and merger mania. Vin and Bob surely remember the action in the dry-bulk sector. How many LNG and other marine type stocks have come public and have had parabolic moves? And it's not just boats, but frac sand MLPs and other "high-growth" MLPs. It always starts with a legitimate fundamental rationale -- in this case the need for energy infrastructure be it midstream or LNG, combined with the chase for yield. Personally, it's hard to not buy, especially when you witness things like EMES (frac sand) double in a couple of months, despite maintaining an overbought RSI throughout the entire rise. Greed over fear. The end of the quarter is Monday. As with all blow-off tops and parabolic moves, you just don't know when it ends. I should listen to my own advice and start selling and stop chasing, but the pull is just that great.
In case those thought that this Trust benefits from higher oil prices, here is what the article says:
"Unfortunately, oil prices rose, leaving the trust on the hook for millions of dollars in settlement costs. These hedges, combined with CHKR's terrible well production, mean that the trust will not capture any of the upside in oil prices until the hedges expire. CHKR is not a good candidate for investors wishing to bet on oil price increases."
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.
Sarge, as a contrast to my sale of NYMT, I decided to hold my WMC through the ex-date because 1) WMC is still trading below book value so there's little risk of an spo, and 2) WMC is yielding between 17-18% and is primarily in agencies, so not only are you getting paid more, but they have a less riskier product than subordinated CMBS and mezz loans. Also, it looks to me like the economy is slowing somewhat which will put pressure on rates downward. Of course with mREITs we have to constantly be aware of the Fed's action on short-term rates. Bullard said yesterday that the market is not understanding that rate hikes are coming sooner rather than later, but he may just be trying to talk the market down. The Fed is like the boy who cried wolf.
The stock has been on a tremendous run since last year when it traded below $55. It is due to take a break. The entire MLP sector has also been on a run. Since breaking out of its sideways trend last year, the stock has gone up in a nice upward sloping channel, occasionally hitting the top end of the channel, then correcting back into the channel. It has not even tested its 50 dma throughout this entire move up, although it is now getting close. The next distribution, which should be a nice increase, will be announced soon and the reaction to that news (is it already priced in?) will say a lot about the future direction (more sideways or onward and upward).