HCP, HCN VTR are all down same amount as OHI, so must be something sector-specific... my guess is some sort of carry-over from HCP news re: ManorCare, probably spooking people in general.
Plus this was $14 at the end of last year... most MLPs are at least more or less flat so far this year since the rally began in Feb... ETE is still WAY oversold relative to other companies in its sector.
Another post that nailed the low.
"o and nnn are near 52 week highs, having held up well and benefiting from the recent rotation to quality reits."
Since you posted this, STAG has returned 36% while O is down a couple pennies.
This isn't a comment about SSW specifically, more a general comment, but IMO the price of the preferred is more closely linked to opinions about the debt than about the common shares. So a sharply discounted preferred price typically suggests some angst about the company's debt -- maybe nervousness about the debt vs re-leasing ships that are coming off lease in coming years or general nervousness about China economy & strength of SSW customers? I would expect SSW preferred (and debt) to yield several % more than a utility preferred, btw -- I think SSW's overall corporate credit rating is no more than B or maybe BB? I don't think SSW has an investment-grade rating?
That said, the price of the SSWN notes has bounced back above par, it had been trading at a sizable discount until recently.
The distributions are not taxable, but all of the company's other tax-related entries are passed through to you. Typically ETE generates a taxable loss each year that will need to get recaptured when you sell and reported as regular income. ETE is far and away the most complicated MLP that I have ever dealt with and suggest that this is an awful choice to hold in an IRA -- with all of the complicated transactions that this company does, who knows what they might do that will trigger a tax-reporting obligation.
If you in fact have a large short-term gain, IMO this is an excellent opportunity to sell it, not pay any tax on the windfall gain, and buy it back in a regular account. There are thousands of posts all over the internet from people who held MLPs in an IRA and have dealt with ugly tax consequences -- if you need to post on a Yahoo message board to learn the basics, you probably shouldn't be doing it. If they close the WMB deal, you can also safely buy ETC in an IRA.
Personally I think he is pretty sincere that if he can use this chaos to get the deal reworked and eliminate the cash, he'd do it. It's pretty clear that ETE/ETP is the stronger company on a standalone basis and don't know how much pressure WMB feels. They look pretty bad if deal doesn't happen and they need to cut WPZ/WMB distribution anyway while ETE is covering their distribution at 1.45X.
It makes a lot of sense to offer such a plan to everyone, giving us the chance to forego cash distributions in exchange for common units at a discount. Would simply conserve a decent amount of cash for ETP's use without actually cutting the dividend. I'd sign up for it.
I personally will be looking to buy back O in low 50s myself, so I don't disagree with the first part of that (I'm one of those people that loves O but not at a yield less than 4%), just won't be selling OHI to buy it..
The very fact that you're rooting for a production freeze to protect your economic interest in an American energy company is exactly why the Saudis aren't going to do it... the whole point of creating the production glut is to cause economic harm to US energy companies. If you pay attention to all of these "production freeze" stories, it's always the Russians who want the freeze, not the Saudis (or god forbid the Iranians, who want to screw US interests even more than the Saudis). You really think the Iranians aren't enjoying screwing the US now to payback for years of sanctions?
If the deal does get cancelled, it will take maybe 15 minutes for someone to file a new lawsuit attacking the convertible deal from the perspective of other ETE unit holders. Once the WMB deal is off, the whole premise of the convertibles evaporates. At a minimum, they will be forced to offer the deal to all ETE unitholders, since the original premise for not doing so -- that WMB objected -- is off the table. I doubt the convertible deal will stick in its present form if the WMB deal doesn't happen.
Could be simply waiting for Fed approval --
"CCAR submissions are IN … now we wait for the results. We are confident in the capital strength of the CS Large and Mid Cap Banks—and with that, their capacity for increased capital return. Capital positions and mix are uniformly stronger than one year ago, risk reductions continue and balance sheet efficiency has improved. That being the case, despite the harsher Fed severely adverse scenario, this balance sheet progress should translate to increased capital return as a result. Herein, we estimate stressed capital ratios and capital return capacity. Important to note, we have used a heavy hand in stressing PPNR and losses—including an estimated hit from negative interest rates, a harsher trading shock and more severe global recession. Still, capital ratios weather our stress scenario with ample cushion for increased capital return…
We estimate total net capital return (dividends and buybacks) increases, to 77% from 58% in CCAR 2015 with a median dividend payout ratio of 31% vs. 27% in 2015. Incremental dollars of capital return will skew to share repurchase given both valuation and the Fed’s clear preference for the flexibility afforded by buybacks.
Who is positioned for the most capital return? We expect Morgan Stanley, Regions Financial (RF), Goldman Sachs, Fifth Third Bancorp (FITB), PNC Financial Services Group (PNC), and U.S. Bancorp (USB) to be approved for the most amount of capital return during 2016 (ranging between 80-100% of estimated 2016 earnings)."
Looks like new preferreds are priced at 8.2%, noticeably better than the ones they just redeemed, so a good data point.
If he sells now in the IRA and buys back in a taxable acct, he's eliminated tax on $8 shr in ST gains, which is almost his entire cost basis. By all means hold it for a couple years, but the longer you hold it, the more you're building up an embedded tax liability that can be ugly in an IRA. When I sold some ETE couple years ago I think I incurred something like $9/shr in recaptured losses. The problem with these MLPs is that you don't necessarily have a choice about when to realize that, especially (as we've seen in the past couple years) when things go south.
Someone should have archived the KMP board so people could read all of the posts from people who owned KMP in their IRA "and not going to ever sell it, so I'll never have a problem" and then when Kinder rolled KMP into KMI it triggered huge tax bills for them.
I think that is just keeping themselves from getting sued -- if WMB people vote down the merger because ETE has already announced they will eliminate the dividend, and then WMB immediately cuts it anyway, that's not going to look good. The fact that their own div is about to be cut is material info when deciding to vote for or against the merger.
It's easy enough to model how the distribution changes with oil price changes, since the expenses will be largely fixed, no more new drilling, no more hedges, and no more new units. The tricky part is estimating future depletion/production. Last two quarters have shown Q-Q declines of 10% and 5%, which I assume reflects the really high initial decline rates for all the new wells that were drilled. So in my spreadsheet I assumed future Q-Q declines of 4%, 3%, then 2%. PER's realized price for oil historically is a discount to WTI spot price, my impression is that this has typically been 5-10%, so if WTI averages $40, they might net $36. If we give them net prices of $34, $38, and $42 for rest of year -- meaning WTI settles in $46 or so, you're looking at distributions of $0.10, $0.11, and $0.12 for the next couple of quarters. I personally don't see WTI getting into $50s on a sustained basis.
It's not an overreaction, it's simple supply-and-demand: huge amount of new shares available, with no obvious new source of demand = much lower price. The flip side is, big drop in price with no change in fundamentals = good entry point in the stock.
ETE has already announced that the distribution will be cancelled when the WMB merger occurs. If the merger does not happen, there is still a chance -- 50-50? -- that the distribution will be reduced, but I doubt it would be eliminated completely.
The 721-Latham clause was clearly written in the contract and WMB agreed to it. All Warren did was use a perfectly legal loophole to protect ETE shareholders. Was it aggressive? Sure, but that's his job.
"My question is why would you sell more equity for which you have to pay dividends versus a bond sale at around 5%"
Because at some point you have to get equity financing on your balance sheet to balance out additional debt... you can't just finance everything by selling new debt. In a regular corporation the additional equity comes from retained earnings, but if you're a REIT and you have to pay out 90% of your earnings, at some point you need to sell new shares in addition to new debt.