John Buckinghman, is a industry leading money manager who focuses on diversification and long-term v...
Dividend Detective's Pair of Preferred
09/15/2017 2:54 am EST
Harry Domash is an industry-leading expert on income investing. In his latest Dividend Detective, the advisor highlights two new recommendations for from his preferred stock portfolios.
We’re recommending purchase of NGL Energy Partners LP, 9.0% Cumulative, Class B (NGL.B). NGL, a Master Limited Partnership (MLP), owns crude oil storage terminals, wastewater treatment stations, and distributes natural gas liquids, propane, and refined crude oil products.
These non-credit rated preferreds were issued 6/12/17 and are cumulative, meaning that NGL remains on the hook for missed dividends.
Last month, NGL Energy Partners (NGL) reported disappointing June quarter results, sinking its common shares around 25%.
The preferreds dropped around $1.00 in sympathy, even though NGL Energy has a strong balance sheet and won’t run short of cash to pay the preferred’s dividends.
Now, the preferreds are paying 9.4% to new money (market yield). The yield to their 7/1/22 call date is 10.1%, the highest we’ve seen for non-speculative preferreds in some time. The only potential downside is that NGL’s dividends require K-1 forms at tax time.
In addition, our new pick for our Preferred Speculator portfolio offers 12% appreciation potential, while paying 9.0%. We’re adding TravelCenters of America LLC, 8.0% Senior Notes (TANNL) to the portfolio.
TravelCenters operates more than 250 travel centers in the U.S. offering diesel fuel and gasoline, truck repair and maintenance services, restaurants, and retail travel/convenience items.
These noncredit rated Senior Notes issued 12/9/14, are in effect, cumulative, meaning that TravelCenters remains on the hook for any missed dividends. The market yield is 9.0%.
The call date is 12/15/17 and the call price is $25.00. Since the preferreds recently traded around $22.24 per share, they probably won’t be called anytime soon.
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