Most income stocks have seen their values trimmed by rising interest rates. I can understand the fru...
2 Solid Dividend Picks
03/17/2014 10:56 am EST
Capitalist Times' Roger Conrad shares two of his favorite MLP picks, as he thinks they could be star performers in 2014.
TERRY: I’m Terry Savage from MoneyShow.com talking with Roger Conrad, who is the managing partner of Halcyon Capital and probably better known as the editor of Capitalist Times, and is the man who can always find income in areas like utilities, natural resources, master limited partnerships, so let’s focus on that, Roger. Everybody wants more income than treasury bills, which give like 0.400%.
ROGER: Right, well you know I think stocks are still the place to be. We are five years into a bull market that’s been fairly historic. We’re also at a time where it seems interest rates are heading higher, but I think there is still tremendous opportunity in dividend paying stocks, which absolutely follows the economy and interest rates are important, but they’re not kind of the make or break factor. I think actually we have some very good opportunities today.
TERRY: Give us a few of those opportunities.
ROGER: I’m looking at a couple things in the MLP space, one of which is companies that have stopped raising dividends and I think there is a good likelihood will later this year. Last year those types of companies that had stalled the distribution growth and really picked it up were the best performers by far in the market place, so I’m looking at things like Enbridge Energy Partners, Calumet Specialty Products, companies that are still very solid, for one reason or another stopped raising distributions and when they start again we’re going to get a nice pop in the stocks.
TERRY: Full disclosure, you have positions in some of these. You’ve recommended them.
ROGER: Definitely recommended them. They’re in our portfolios.
TERRY: Now the fed is, well it’s not tightening up, but it’s not going to provide as much liquidity. What impact is that going to have on dividend paying stocks?
ROGER: Well I mean initially there’s an emotional reaction to that and we saw a little bit of that last year but what a lot of people don’t realize is a lot of these dividend paying stocks were actually up pretty substantially last year, so it’s all about earnings, it’s all about the economy, to a lesser extent interest rates, but only as they affect the earnings of the companies themselves, so if I can earn a great return I can absorb those higher borrowing costs and you really – that’s the way to look at it.
TERRY: So suddenly with higher rates maybe down the road for CDs is there a little bit more competition for investor’s yield dollars?
ROGER: Possibly but I think you have to go a pretty long way before you can compete a CD with a company yielding say 5% and growing that dividend 5% a year. I think it’s a compelling combination and particularly if you look at American Energy where there’s such tremendous activity going on, huge opportunities to be had. This is where you want to have your money.
TERRY: And people can find that in your newsletter?
TERRY: Alright. Thank you very much Roger Conrad for joining us. I’m Terry Savage from MoneyShow.com
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