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ConocoPhillips Message Board

sollid_companiess_only 45 posts  |  Last Activity: Jun 22, 2014 11:41 AM Member since: Aug 24, 2012
  • Reply to

    ERF Has Done Ok By Me!

    by sollid_companiess_only Apr 18, 2014 9:31 AM
    sollid_companiess_only sollid_companiess_only Apr 18, 2014 3:09 PM Flag

    Hardmetalman, since you are picking one point on a graph for exactly two years ago, let me be more specific. I purchased my initial lot of ERF shares on EXACTLY the following date, 7/18/2012 (From Fidelity IRA). I purchased this lot at EXACTLY $13.24 a share and have had the dividends dripped ever since. The stock even dropped below $12 on a couple of occasions.

    Yes, you are correct when you state that two years ago the pps of ERF was around $19.72. However, the price did fall off dramatically, shortly thereafter, and ERF shares stayed in the range of $13 to $15 a share for a period of about 12 months, from May 2012 to May 2013, the period in which I bought my initial lot. And for a year I dripped while the pps was below $15.

    Actually, that makes my gain of 72% even better as I did it in less than two years, by about two months. But if you want to be a nit-picker and insist the the two year period then I'll grant the correctness of you assumption. I should have been more exact in my initial post.

  • sollid_companiess_only sollid_companiess_only Apr 18, 2014 10:28 AM Flag

    Altria, Reynolds, and Lorillard pay into the program in amounts proportional to their respective market share. As a result of the program, Altria paid $400 million to quota-holders in each of the last three years, amounting to about 10% of free cash flow. Reynolds averaged a little more than $200 million per year, or 15% of free cash flow. Lorillard recorded quota-related charges of $120 million per year, or 11% of free cash flow. After these obligations are fulfilled by the end of this year, each company will experience a substantial increase in annual free cash flow.

    How the companies can put the cash to use
    Dividends are the most obvious use of the extra cash. Tobacco stocks attract a wide following of dividend investors because of their ample free cash flow and willingness to pay out a high percentage of earnings. Altria yields 4.9%, Reynolds yields 4.7%, and Lorillard yields 4.3%. If these companies were to use the extra cash to increase their dividends, the market would likely reward the stocks with higher valuations.

    However, tobacco companies may have other ideas for using the extra cash flow. Now that the bulk of the industry's major legal liabilities are behind it, a new wave of consolidation may emerge.

    Good luck to all you MO's out there!

  • sollid_companiess_only by sollid_companiess_only Apr 18, 2014 10:27 AM Flag

    Altria Group, Reynolds American, and Lorillard are about to have a lot more cash to spend. Some three-quarters of a billion dollars will start flowing to the three largest tobacco companies' bottom lines as federal tobacco quota legislation rolls off. Read on to discover why the windfall exists and what it means for your investments in Altria, Reynolds, and Lorillard.

    Tobacco quota expiration
    The infusion of cash due later this year to Altria, Reynolds, and Lorillard is a result of the expiration of the Tobacco Transition Payment Program, or TTPP. The TTPP was signed into law in 2004 and is set to expire in the second half of 2014.

    The TTPP's origins lay in the Great Depression. In one of his many economic experiments, Henry Wallace created a federal program to limit the quantity of tobacco grown in the U.S. and to moderate a minimum price for the crop. The program was designed to aid struggling farmers during the depression by increasing the value of their crop. Producers were given quotas and could only harvest up to a certain amount of tobacco.

    However, after decades of declining tobacco consumption, many quota-holding farmers were struggling to stay afloat at the turn of the millennium. As a result, tobacco-state politicians passed a 2004 federal bill that established an industry-funded buyout of tobacco quotas. Manufacturers and importers were forced to pay $9.5 billion to quota-holders over 10 years, ending in the third quarter of 2014.

    Continued in a reply to this post

  • sollid_companiess_only by sollid_companiess_only Apr 18, 2014 9:31 AM Flag

    Two years ago, I invested $7k in ERF shares. My holdings are in a self-directed IRA account, thus they don't get hit with the Canadian 15% tax/haircut. I have about 10 dividend paying quality energy stocks in this account. ERF has outperformed them all, yielding a gain of 72% over the last two years.

    Thanks ERF!

  • Reply to

    dividend increase

    by sharkbitemcnasty Apr 15, 2014 4:18 PM
    sollid_companiess_only sollid_companiess_only Apr 16, 2014 3:48 AM Flag

    7% sounds impressive, but it's only a penny a share per quarter. A penny's not too impressive.

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