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Focus on Dividends

By Roger S. Conrad on Jan. 30, 2019

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.

In This Issue

1| Feature. More than three-dozen energy companies and US MLPs we track currently yield 10 percent or more. Some high yielders will cut distributions over the next 6 to 9 months. Others, however, have what it takes to maintain payouts. We highlight exceptions.

2| Portfolios. We have updates on several Actively Managed Portfolio recommendations. Our three tables of companies on the Energy and Income Advisor website have been updated to reflect recent developments: Coverage Universe (producers and service companies), International and MLP/Midstream.

3| Endangered Dividends List. CSI Compressco LP (NSDQ: CCLP), Crescent Point Energy (NYSE: CPG), Peyto Exploration & Development (OTC: PEYUF), Seadrill Partners (NYSE: SDLP) and Teekay Offshore Partners LP (NYSE: TOO) have all announced distribution cuts since the previous issue of Energy and Income Advisor. Foresight Energy LP (NYSE: FELP) joins the EDL on growing weakness of the core coal mining business.

Energy & Income Advisor

Your complete guide to energy investing, from growth stocks to high-yielders.

In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

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  • 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