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Endangered Dividends List

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.

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.

Endangered Dividends List

The latest two EDL members to announce dividend reductions are Bonterra Energy (TSX: BNE, OTC: BNEFF) and Sanchez Midstream Partners (NYSE: SNMP).

Canadian oil and gas producer Bonterra is slashing its monthly payout from 10 cents Canadian to just a penny a share. That’s a direct consequence of a decline in its realized selling price for oil to just CAD21.50 per barrel from CAD77.20 since the end of the third quarter.

Earnings Reporting Season Raises Risk

Our EIA Endangered Dividends List highlights companies in our coverage universe where dividends are at elevated risk of being cut for one or more of the following reasons:

  • Cash flow coverage of distributions is inadequate.
  • Elevated debt levels with imminent refinancing needs.
  • Revenue pressure triggered by weakness for at least one key asset.
  • Inability to access the equity market on favorable terms to fund capital spending, forcing management to utilize more internally generated cash flow.
  • Exposure to volatility in commodity margins from either rising or falling prices of raw materials.
  • Aggressive general partners anxious to buy in limited partners’ cash flows at discounted prices.
  • Regulatory reversals.
  • Expiring contracts with little hope for renewals at comparable rates.

Most of the companies on our list suffer from more than one of these afflictions.

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    • 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