Also, from the Q1 CC in late April, the company suffered 175 vacancies from the bankruptcies of four retailers (apparently from December and following YE). The CEO reported that they had made good progress in re-leasing the spaces with 36 leases executed and an additional 57 leases in active negotiations. Further comment indicates the leasing environment remains healthy in Q1 with an average increase in gross rents for new and renewal leases of 10.6%.
Although disappointing for current holders, the re-leasing appears to be going well. So, all and all, the above issues appear to have created an attractive yield (6.5%) and entry price. However, the general market will likely remain volatile for a variety of issues including the Greece negotiations, so one can probably pick their spots to build a position. I also took a look at a couple of other REITS, but quickly eliminated those yielding in the 2-3% range. In general, they still appear highly susceptible to sizable corrections in the current environment. Just my take and GL.
From Investor Place article mid-May:
The specter of rising interest rates has finally coming to a head for a variety of high-yielding asset classes. Among the victims? Master limited partnerships (MLPs), plain ol’ utility stocks … and especially hit hard have been real estate investment trusts (REITs).
Last month, as the Federal Reserve toyed with raising rates, the FTSE NAREIT all-REITs Index sharply fell 4.71%, more than knocking down the prior quarter’s 4.05% gains.
But here’s the thing: REITs can do OK in rising-rate environments. Really.
According to data provided by Morningstar, via Columbia Threadneedle Investments, REITs do feel rising interest rates immediately. However, that knee-jerk reaction eventually fades, and performance rebounds quite sharply. Columbia shows that over the 21 periods of time since 1980 when interest rates rose by at least 50 basis points, the FTSE NAREIT All Equity REIT Index managed to return an average of 16% over the next 12 months.
Translation? The current selloff (as well as the one we’ll see when the Fed actually does raise rates) should be used as buying opportunities by anyone looking for suddenly cheaper sources of income.
The article goes on to recommend 7 REITS to buy for their growing dividends including CBL.
I haven't been in the stock for ages, but started to initiate a position today. I admit, I have some homework to do, but it appears to me that they continue to improve their balance sheet, FFO, and have increased their distributions. They also have a good dividend coverage ratio, and have plenty of room to continue annual dividend increases. Therefore, the sell off does not appear to be stock specific, but fear of the global unknown associated with the Greece negotiations, and possible beginnings of an increasing interest rate environment. The latter has caused many REITS and MLPs to slowly retreat over the last few weeks. It doesn't make too much sense based on alternative investment yields, but I knew I didn't want to fight it. Anyway, the price on this was back in my buy range, and others will begin buying when they get comfortable with market conditions. Personally, I don't feel the economy is all that strong, and Europe could blow up anytime forgoing much concern over a long trend of rate hikes. Hope this helps and GL.
Yes, thanks. The article can be found on governors biofuels coalition org site. There are two more articles as well, one from Bloomberg and one by E&E reporter. Basically, all discuss a surplus of RINs now following the proposed RFS volumes and resulting lower RIN prices. Most trade privately and reportedly, the RIN price was down to 30 cents May 29. GL
I see the 2015 ethanol rins were down to 44.5 to 45 cents for the June/July contracts. The 2014 Rins were 45.5 to 43 cents for the June/July 2015 contracts. So a little more slide.
The CME reflects the 2014 Biodiesel Rins at 61 cents. The 2015 Biodiesel price is at 92 cents, but hasn't changed since at least last night, so it might not have traded or has not been updated. I don't pay for the service to get better info, so hard to say.
The advanced Biodiesel 2015 contract was 77 cents dropping 1-2 cents each month through Feb 2017 to 38 cents. There is no data for the 2014 advanced Biodiesel contract, so I am assuming the 2014 contracts for advanced bioD are done.
Anyway, it looks like the prices on the biodiesel are giving some back from the initial move in the article you relayed and the ethanol rins continue to trend down.
They can choose when they want to make purchases, or can accrue the expense for the given compliance year and thus the end of quarter price is applied for the accrued portion. Off the top of my head, they have until February 28th to settle up for the prior year, but 2014 quota was deferred and the announcement Friday was a proposal, so is still not finalized. After finalizing, then they will have a period of time to comply. Based on their reported accrual, I would guess that 2014 obligation has been filled, or is substantially complete. They might even have even purchased extra that can be used for 2015. This is just my take from what I have read in the past. I am thinking Q2 will be a strong quarter, but we have a ways to go yet. GL
Thanks Sean. Nice find. The conventional biofuel component (corn-based ethanol) far outweighs the allocation for advanced biofuel, biodiesel, & cellulosic components, so good to see that component plummet. Hope it continues and swears off some of those speculators from ever visiting that commodity again. All-in-all, this quarter is looking good. GL
The EPA released their new RFS proposal for 2014 - 2016 this morning. In review, the 11/13 2014 RVO proposal slashed original volume targets across the board with a reduction in conventional biofuels (mostly corn-based ethanol) from 14.4 to 13.01 billion gallons. This proposal took a lot of heat from the ethanol industry and was deferred in 11/14. The new proposal bumps the conventional biofuels target to 13.25 billion gallons from the 11/13 proposal, which is all in biomass diesel and cellulosic biofuel volumes. This is still way down from the original 14.4 bill gal. For 2015, conventional biofuels increase to 13.4 bill gal.
What is particularly interesting is the estimated blending percentage in the new proposal is 9.02%, 9.04%, and 9.63% for 2014, 2015, and 2016. The 11/13 proposal only showed the 2014 percentage of 9.20%. So while the total gallon level is a bit higher, the percentage blend target has dropped further, and from what I have read, even further from the blend wall, a part of the EPA focus. Since the prior proposal was hashed and rehashed and is already17 months late, I would guess it will not be deferred or modified further. On news of a pending announcement, RIN prices began to back down a bit, and subsequent to the announcement, RINs are initially off another 16.5% at 60 cents. With the decreased total blending target percentage down, I am hopeful we will continue to see some further downward price pressure on the RINs. We'll see how it goes, but IMO, this appears to be some pretty good news.
The consensus estimate, essentially an estimate of the distributable CF, is currently 97 cents. We have a ways to go yet and while estimates may ultimately be lowered some more, I still expect a nice improvement over the prior quarter. April and May (to date) have been good months and the company will likely also benefit from the moderation of the local market fuel price negatives. GL
The spot price for RINs at end of Q1 2015 was 72 cents from which I believe the company calculated their Q1 accrued liability on.
Also, WCS is currently running at about an $8.75/barrel discount to WTI, and Bakken crude is about an $11/barrel discount to WTI, the two of which accounted for over 85% of NTI's feedstock in Q1. Q2 is looking very strong so far. GL
Sentiment: Strong Buy
For April, I calculate the NYMEX 3-2-1 benchmark at $24.30. This is well above the Q1 average and points to stronger Q2. Also, at the close today, the NYMEX 3-2-1 was roughly $25.80.
Sentiment: Strong Buy
For April, I calculate the NYMEX 2-1-1 average at 23.89. At the close today, the 2-1-1 is about $25.30.
For reference, the benchmark NYMEX 2-1-1 average for Q1 was $22.80 as reported by CVRR in their Q1 earnings release. So far, so good. GL
April was a fine month for refining margins. I should be able to get the final numbers this next week, but it should be around or over $24/barrel. This time of year, CVRR has much more modest local market negatives than Q1, so Q2 is on track for stronger quarter.
IMO, over the next couple of months, you will see this sector heat up. Several refiners have reported good results and the Q2 outlook is even stronger. This has created terrific yields on the current underappreciated share prices and thus, opportunity. GL
Sentiment: Strong Buy
I see Yahoo finally fixed their posting issue over the weekend. I haven't been able to post for a couple of weeks, and I would bet many others had the same problem.
It tends to trade a little weak ex-divi and we saw an end of day Friday dump that is not too uncommon going into the weekend. Prior to ex-date, their was concern over the climbing international bond yields. Since bond rates remain incredibly low, I don't see this as a concern to high yielding stocks myself, but rather, as more of the same from those hoping for a market correction, so they can play the volatility. Anyway, I think we are at least near the bottom, if not there, and expect a better week ahead.
On the new 76 cent annualized distribution, the rate on the closing price is now over 14%. So far, Q2 looks to exceed Q1 and this is supported by the analyst expectations. Thankfully, we got the announcement in the nick of time as this was one a very few stocks with a green arrow today. In time, we will likely see the share price move closer to the 12.5% yield, which is over $24 while we wait for the Q2 results, and at the same time, shouldn't have much downside exposure even if the market does correct due to the current yield. GL longs.
Sentiment: Strong Buy
M, it sure would be nice if it was that simple. I have not run the numbers on ALDW for this quarter, but that seems pretty optimistic. They hit home runs when there is a wide discount between WTI-Midland to WTI, one on their primary feedstock sources. I believe the WTI-Midland discount for much of Q1 was less than $1, and I have seen this discount in past quarter in the $8-$10 range. So they may beat the 72 cent Yahoo analysts consensus estimate, but I wouldn't expect a blowout. Hope this helps and good luck to you.