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Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth.

Roger built his reputation with Utility Forecaster, a publication he founded more than 20 years ago that The Hulbert Financial Digest routinely ranked as one of the best investment newsletters. He’s also a sought-after expert on master limited partnerships (MLP) and former Canadian royalty trusts.

In April 2013, Roger reunited with his long-time friend and colleague, Elliott Gue, becoming co-editor of Energy & Income Advisor, a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector.

Although the masthead may have changed, readers can count on Roger to deliver the same high-quality analysis and rational assessment of the best dividend-paying utilities, MLPs and dividend-paying Canadian energy names.

Articles

Endangered Dividends

There have been no additional dividend cuts in our three coverage universes since the previous EIA issue. That’s largely a function of timing, as companies are winding up the calendar first quarter and won’t be declaring their next distributions until next month.

However, calendar fourth quarter reporting requires considerably more legal filings. That means it typically takes several weeks longer for many companies to compete filings than it does other times of the year. And the good news is several later reporters did come in with encouraging news and guidance.

Can Energy Stay Hot?

Energy stocks are showing real signs 2019 will be the year they break out of a nearly five-year slump.

Both the S&P 500 Energy Index and the Alerian MLP Index posted total returns in the low teens for the first two months of 2019. That’s energy stocks’ best start to a calendar year since 2013, when those two indexes finished up 25 percent and 27.6 percent, respectively, en route to making all-time highs.

Benchmark WTI Cushing crude started 2013 in the low $90s per barrel, briefly broke down to the mid-$80s in April, then hit a high of $110 plus in late August before closing the year right around $100. Henry Hub gas, meanwhile, traded between $4 and $5 per thousand cubic foot for most of the year.

Those prices are a far cry from where we are now. But the trajectory of the commodities themselves has been generally encouraging in recent months. So is the fact that energy midstream master limited partnerships weren’t left out of this uptrend, as they were when oil rallied last year.

Endangered Dividends List

Summit Midstream Partners LP (NYSE: SMLP) is cutting its quarterly payout in half from 57.5 cents to 28.75 cents. Management called the move a “repositioning” to “fund attractive growth opportunities and maintain a prudent capital structure.” The partnership also swapped its general partner’s IDRs for 8.75 million new common units, boosting outstanding shares by roughly 12 percent.

Endangered Dividends List

No companies on either the Endangered Dividends List or within our energy stock coverage universes have announced dividend cuts since the previous issue. That includes Sanchez Midstream Partners (NYSE: SNMP), which maintained its payout this month despite the apparent slide toward bankruptcy of its parent and leading customer Sanchez Energy Corp (NYSE: SN).

Focus on Dividends

Dividend investors can certainly be forgiven for distrusting energy companies’ dividends.

We launched the Energy and Income Advisor Endangered Dividends List on June 30. Of the original list of 16 names, only four have managed to avoid a dividend cut since. Of the dozen or so we’ve added to the list more recently, fewer than half have managed to hold up. And all 15 companies currently on the EDL are at high risk of making reductions sometime in the next 6 to 9 months, if not eliminating distributions entirely.

All of these cuts are, of course, on top of dozens more through the first half of 2018, dating back to when oil prices first broke under $100 a barrel back in 2014. And it doesn’t help that the latest round has come with benchmark West Texas Intermediate Crude oil prices still nearly twice their early 2016 lows.

The carnage has understandably made many skeptical that any energy company’s dividend is secure, no matter how good numbers and guidance get. Kinder Morgan Inc (NYSE: KMI), for example, earlier this month announced strong fourth quarter operating numbers, raised guidance and affirmed a 25 percent dividend increase for April. Its shares, however, managed only a small surge, which they’ve since given up.

Skepticism is even more clearly etched in prices of the three dozen or so master limited partnerships we track that currently yield 10 percent or more. Sure, some of them are headed for dividend cuts, with EDL companies at the greatest risk. But other high yield companies appear to have fallen despite all indications they’re still strong on the inside.

This issue, we highlight high yielders still likely to hold their payouts this year and recover their lost ground. Timing will depend squarely on what happens to oil and natural gas prices. The Alerian Index, for example, has closely followed oil prices, though recently outperforming the commodity.

High Yield Values

Where there’s smoke there’s fire is the old saying. And in light of the rash of dividend cuts and severe selloff of higher yielding energy companies in the second half of 2018, it’s easy to conclude as many investors have that the entire sector is finished as an income source.

Endangered Dividends List

American Midstream Partners (NYSE: AMID) will eliminate its distribution this month. That follows a 75 percent cut announced in July, which was preceded by a more modest 12.7 percent trimming two years earlier.

The immediate catalyst is a restated credit agreement, which based on expected fourth quarter financials would preclude management’s ability to pay a distribution.

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  • Live Chat with

    Elliott and Roger on Mar. 26, 2019

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor