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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 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.

Oil: It’s Not 2014

Crude oil prices accelerated their recent downtrend this week. West Texas Intermediate Crude at Cushing Oklahoma, the North American benchmark, has now dropped from high 70s to mid 40s in less than three months.

Prices in more transportation-constrained basins have fared worse. Edmonton Mixed Sweet, for example, is now trading for less than $40 a barrel. WTI Midland is as well, $7 a barrel less than WTI Cushing as swelling Permian Basin output has swamped available pipeline capacity.

Given the pounding we’d already seen in many energy stocks before this selloff, investors can be forgiven for thinking the sector is headed for another 2014-16 crash. This issue is devoted to those concerns.

Our feature article focuses on both the supply side and the demand side, with comparisons to two periods of steeply falling oil prices:

• The Financial Crisis of 2008, a period when global demand fell off a cliff.

• The 2014-16 oil crash, when Saudi Arabia and other traditional producers tried to flush out US shale producers by dramatically increasing output to flood supply and drive down prices.

Endangered Dividends List

Altagas Ltd (TSX: ALA, OTC: ATGFF) cut its monthly dividend to 8 cents Canadian from the previous 18.25 cents, starting with the January 15 payment. We highlight the move as part of a strategic reset by management in the December 13 Alert “Altagas Resets for a Hostile Capital Market.” Kinder Morgan Canada (TSX: KML, OTC: KMLGF) announced its 2019 financial projections, which reflect the now closed sale of the Trans Mountain pipeline system to the Canadian government.

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  • Live Chat with

    Elliott and Roger on Apr. 24, 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