I decided to switch a small amount of my portfolio from HFC to WNR. After reviewing the numbers, I thought that HFC was good, but WNR has edged them out performance wise over the past couple of years. It also looks like they will continue to do so in the future. WNR is not my major holding in the refining sector, but it looks promising - even at these prices.
I wouldn't say earnings sucked. They didn't meet the analyst expectations, but they still had decent earnings per share, considering the stock price. I think a lot of people had overblown expectations and in the end, they even swayed me a little. However, the first quarter is usually not the best quarter for refiners and even if they didn't improve, the yearly income at this rate would be $ 2.32/share. It's still above a 10 % return. I expect them to continue to perform at least at this level through the 3rd quarter. With a little luck, they may knock one out of the park.
The other thing to consider is that the $ .71 dividend brings the lifetime earnings of this stock up to $ 5.48 + $.71 = $ 6.19/share in about 2.37 years. This means that the average dividend payout per year is $ 2.61/year or about $ .65/quarter. It's over 12.5% per year. That's hard to find nowdays. In fact, I haven't found better except for CVI which is another refinery stock. Most of the large payouts for CVI were nearly 2 years ago, but this stock is still going strong. If anybody has a stock with better dividend returns for the last couple of years, I'd be interested in looking at it! Until I find something more interesting, I'll stay here.
I appreciate the fact that they don't hedge. In the long run, it's a waste of money. In the short run, it can bite you every now and then, as we learned last quarter. The trailing p/e will continue to look artificially low until it falls off the books, but that shouldn't really matter to anyone except the most superficial investor. For the most part, the sophistication of the stock market buyer has increased to the poiint where it won't make a difference.
Just projecting from what other refiners in this area are reporting, I'm now thinking we should be around $.85/share earnings. I wish JVRAT had weighed in and told us what he predicted. He seemed to always nail it within a couple of cents. I don't have the time to do the heavy lifting when it comes to calculating these things, but I can make some market comparisons.
One thing I can see clearly is that the dividends on this stock have on average crushed the paybacks on all other refinery stocks except CVI. I don't know why CVI was so high a couple of years ago, but I have a feeling they were just emptying out their savings. I wish I'd been a part of it, but hind sight is 20/20.
The most comparable refinery to this MLP's holdings is either WNR or maybe HFC. Also, Phillips has a refinery in the area, but it is hard for me seperate the contribution from that refinery to their overall performance. This stock is currently selling at quite a discount to HFC and WNR. Last year, I figured that the discount was about 50%, but it has evened out a little. I made my comparison by comparing earnings/share with the stock price over the 2+ years that this mlp has been in existence. The earnings on this stock have swung dramatically, but the average has remained higher than the others. Actually, the whole refining sector tends to trade at a discount to other stocks and they have been for as long as I can remember. I guess the analysts are eternal pessimists when it comes to this industry. I don't mind, it just gives more opportunity for me!
I guess it's just one more example of the irrationality of the market. They literally crushed the expectations of the analysts, yet the stock goes down. It's never good to invest for the short term because things like this are constantly going on. In the long run, good investments pay. Of course, I've been telling myself this for two plus years. I'm a little dissapointed in the performance. I thought we were through with this sub 40 bs.
This should be a good indication of what is coming. I think it's a given that this quarter will be strong. It also looks like the second quarter is shaping up nicely. Usually,, the 3rd quarter is the strongest for the year, so I'm hopeful that the rough stuff is behind us. I expect this stock to surge by at least 15 % over the next month.
Sounds like a fun way to test whether or not my broker is savvy on these things. The only problem will be that I usually talk to him through e-mail and texts, so I won't be able to tell if it sends him for a loop or not!
A couple of months ago, I bought a lot of ALDW in my IRA. However, I've got this nagging recollection that it was better to buy an MLP in a regular investment account because buying it in an IRA was a kind of double tax protection that was basically unneeded. I don't recall the argument exactly and when I searched for it on the internet it seemed to be pretty confusing. I guess my bottom line question is whether it really is unadvisable to buy an MLP in a retirement account. Obviously, it turned out well for me, but would it have been better to buy it in my regular account?
I guess this is what happens when others control the technology. It reminds me of Microsoft when I used to try to do programming. They kept changing things to the point that none of my programs would ever work for more than a couple of months. They never warned of changes or gave any reason for them, they just threw in something that would crash my programs every couple of months. It would take hours of investigating to figure out what went wrong.
Good luck on that doubling. I've been in since October, 2012 and haven't seen it go anywhere. The dividends are nice, but hardly worth waiting around for - in fact, I'm not even sure they even make this stock keep up with inflation. I may do you a favor and sell - that seems to be a sure fire way for a stock to get a pop!
I guess my message to the board of directors is not to burden this MLP with a dog of a refinery like Krotz Springs. The last I heard, Krotz needed major investments just to stay current with the EPA regulations. However, things may have changed because my information is pretty old. The point is, if we add anything to this MLP, it better not bring down the average earnings per share, or they aren't doing us a favor. I've looked around and there is nothing in the refining industry that matches the earnings of this MLP on the basis of share price and earnings per share. If they add another refinery, they need to do their home work and structure the deal so it adds. I can take a quarter or two of bad earnings because of a shut down, either planned or unplanned, but what I don't like is constant low earnings because I've got bad assets that don't pay back.
You say "adding assets to ALDW may not be that bad of a deal", but I say that anything they do to dilute my shares with a less profitable operation is bad for me. I want to keep owning an asset that pays back, I don't care about expanding into another refinery. If I want to personally expand into another refining operation, I'll take my profits and invest them somewhere else. I don't need somebody else to make that decision for me. I'm sure that if the deal was structured correctly, it could be a good thing, but my thought is that the way this MLP is structured is a good deal right now. By and large, it's hard to find anything worth investing in on the stock market. I think that the odds are overwhelming that any change to this MLP will make it worse, not better. You can talk about synergies and you can talk about taking the bumps out of the earnings, but the bottom line is that any change will most likely bring this stock's profitability closer to the Wall Street norm, which, frankly, isn't that great.
I was personally relieved when the deal to add the other refinery to this MLP fell through. Unfortunately, I think they will try again. My question is: why? We have a good thing here and I am personally happy with the returns. In fact, it looks like I've almost paid back my original investment in dividends alone. I don't care if they have a turn-around and we don't get a payment for a quarter or even two, I only care about the average. I'm concerned about this Delek deal. What is going to happen? Will this be an excuse to add a bunch of low return refineries to the mix? If so, I'll seriously consider selling.