An Undervalued High Dividend Stock With Lucrative Cash Secured Puts

Posted on May 15, 2013

by Robert Hauver
We first wrote an earlier article about Northern Tier Energy LP, (NTI), back in early April, when the big question was whether or not this MLP would continue to pay its huge quarterly dividend. This older article also details NTI’s business model, which we like.
In February, NTI paid out a $1.27 dividend, which equated to an 18.55% forward dividend yield, making it one of the highest yielding dividend paying stocks in the market, and putting at the top of the Energy table in our High Dividend Stocks By Sector Tables.
Well, we’re happy to report that, thanks to a big blowout quarter, in which NTI reported an adjusted net income of $108.2 million, that was 20 times its Q1 2012 adjusted net income, NTI is keeping the faith, with another huge distribution, which goes ex-dividend on May 21,2013:

“The Board of Directors of Northern Tier Energy GP LLC, the general partner of Northern Tier Energy LP, has approved a first quarter distribution of $1.23 per unit that will be paid in cash on May 30, 2013 to common unit holders of record as of the close of business on May 23, 2013.” Cash available for distribution totaled $113.2 million for the first quarter 2013.” (Source: NTI website)

This continuing huge dividend payout raises the same question it did in the 1st quarter of 2013: Will NTI keep making these big quarterly distributions, or will it trim its payouts in the next few quarters?
Fortunately, NTI also has high options yields, which give you some alternatives. We currently have a very attractive September $25.00 put listed for NTI in our Cash Secured Puts Table. This put will pay you $2.60 now, and expires in roughly 4 months, which gives you a 30%-plus annualized yield.
To put this into perspective, even if NTI matches its current $1.23/unit May payout in the next quarterly payout, in August, you’d receive $2.46 in distributions, (possibly), vs. $2.60, for sure, right now, by selling the September $25.00 put. The other benefit of this trade is that it gives you a $22.40 breakeven, which is 16% below NTI’s current price/share.

The traditional, simpler approach is to buy NTI outright, and hold onto the shares long-term, using the dividend stream for income, and to ride out the potential ups and downs of NTI’s future share price and distributions.
We’ve adopted a combo of 2 strategies for NTI, since we believe in its business model: 1. Buy and hold for income and potential price appreciation 2. Sell cash secured puts, in order to gain additional income, and lower our ultimate breakeven cost.

NTI also has Covered Calls, which we list in our Covered Calls Table, where you can also see details on over 30 other covered calls trades.
However, the problem with adopting a short-term Covered Call trade for NTI is the uncertainty surrounding its next quarterly distribution – will it be $1.23 again, or will they cut the next distribution?
The biggest short term obstacle in NTI’s path is that they’ll be doing a scheduled shutdown of their refinery in the 2nd quarter for about 25 days. But there’s a silver lining- they’re doing the shutdown in order to expand their refining capacity. Yes, the 2nd quarter will show lower earnings, BUT, long term, the shutdown is a positive for NTI and its shareholders, due to the expanded capacity.
Institutional investors also believe in NTI’s future growth, as do analysts, who are projecting big EPS growth for 2013 and 2014, making NTI look undervalued on a PEG basis:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was long NTI shares and short NTI put options at the time of this writing.

These 2 High Dividend Stocks Go Ex-Dividend Next Week

Posted on April 25, 2013

by Robert Hauver

There are 2 dividend stocks from our High Dividend Stocks By Sector Tables, which go ex-dividend on 5/1/13: Calumet Specialty Products Partners, LP, (CLMT), and PAA Natural Gas Storage, (PAA).

CLMT is a refiner and processor of specialty hydrocarbon products, and operates six plants including operations in Northwest Louisiana, Pennsylvania, Texas and Illinois.

PAA’s business consists of the acquisition, development, operation and commercial management of natural gas storage facilities. Although PAA is listed as a Gas Utility stock on financial websites, it’s actually more of an Energy-related stock.

PAA owns and operates 3 natural gas storage facilities located in Louisiana, Mississippi and Michigan. PAA’s customers include electric utilities, local distribution companies, pipelines, natural gas producers, LNG importers, aggregators, marketers, and industrial and commercial end use customers.

Valuations: Both of these stocks are closer to the low end of their 5-year P/E range – (PNG went public in 2010, so there’s less history for it than for CLMT.)

Dividends: CLMT has a very impressive 51% dividend growth rate over the past 5 years, having raised its quarterly distributions from $.45 in 2008-2009, up to the current new $.68 payout. In fact, CLMT’s frequency of rate hikes has also increased – they raised their distributions 3 times in 2011, and 4 times in 2012, and just raised it again in the 1st quarter of 2013, to $.68 from $.65. After its 2010 IPO, PNG raised its distribution from $.21 to $.34, and then from $.35 to $.36 in 2011, where it remains currently:

Performance: Both stocks have had a strong run over the past year, especially CLMT.

Options: Although both stocks have options available, at present CLMT’s are much more compelling, particularly its cash secured puts. This strategy would make sense in light of the 93% price gains CLMT has had. This put trade offers you a 15%-plus annualized yield, and a breakeven that’s 11.55% below CLMT’s share price.

You can see more details on this and over 35 other high options yields trades in our free Cash Secured Puts Table.

If you’re also interested in selling Covered Calls, we maintain a free Covered Calls Table, which also has over 35 high yield trades.

Financials: Except for its heavier debt load, CLMT’s ratios look stronger vs. its industry than PNG’s do. CLMT has an Interest Coverage ratio of 1.64. PNG has a much higher Operating Margin than its peers, and most of its ratios are in line with its industry’s averages:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author had no positions in CLMT or PNG at the time of this writing.

Can This High Dividend Stock Maintain Its 18% Dividend Yield?

Posted on April 10, 2013

by Robert Hauver

Looking for high dividend stocks? Our search for interesting dividend stocks has uncovered a refining/retailing/pipeline stock with one of the highest dividend yields in the market: Northern Tier Energy, (NTI), is a combination refining/retailing company, based in St. Paul, Minnesota, near the booming Bakken shale play in the Midwest.

NTI’s ability to source Bakken light sweet crude and Western Canadian heavy crude, gives it a big advantage as a refiner, since both of these sources are cheaper than West Texas Intermediate crude. NTI owns one of only two refineries in Minnesota and one of four refineries in the Upper Great Plains area within the PADD II region.

In addition to refining, NTI also has a ready sales outlet for its refined products, as it owns 166 convenience stores under the SuperAmerica brand and also supports 68 franchised convenience stores, mainly in Wisconsin and Minnesota. NTI also owns various storage and transportation assets, including a light products terminal, a heavy products terminal, storage tanks, rail loading/unloading facilities and a Mississippi river dock.

The refining business also includes a 17% interest in the Minnesota Pipe Line Company, which owns and operates the Minnesota Pipeline, a 455,000 bpd crude oil pipeline system that transports crude oil (primarily from Western Canada and North Dakota) for approximately 300 miles from the Enbridge pipeline hub at Clearbrook, Minnesota to the refinery. The Minnesota Pipeline has historically transported the majority of the crude oil used and processed in the refinery. (Source: NTI website)

Dividends: Since its IPO in July 2012, NTI has paid 2 distributions: $1.48 on 11/29/12, and $1.27 on 2/28/13. Projecting their most recent $1.27 distribution forward for 3 more quarters gives NTI a very high dividend yield of 18.55%!

Here’s the million $ question: Will NTI maintain this level of dividends? The following may offer a clue for the upcoming May distribution:

In the 1st quarter of 2013, the avg. retail gasoline price was $3.55, better than 4th quarter 2012. If you use 37% as a projected ratio of distribution paid to avg. retail gasoline price, this would indicate a potential May payout of $1.31. Of course, this is a very rough estimate, and it could be derailed by other factors – NTI’s refining margins may have shrunk in the 1st quarter, or mgt. may decide to utilize more of its cash for infrastructure expansion investments. NTI stated in a recent investor presentation that it “plans to invest in logistics operations targeting trucking, terminal and pipeline assets.”

Given this uncertainty, and NTI’s big 88% rise since its IPO, what should you do?
Options: Here’s what we did, (so far). We sold puts below NTI’s share price, to lower our breakeven, in case the stock price falls, if NTI cuts its May distribution. This trade projects the same quarterly distribution of $1.27 in May and August. Coincidentally, the Sept. 2013 $25.00 put pays $2.50, which nearly matches this projected payout. (Note: put sellers don’t receive dividends.) You can find more details on this and over 30 other put trades in our free Cash Secured Puts Table.

Covered Calls: Alternatively, you could buy NTI and sell covered calls to hedge your bet. This would pay you less option $ up front, but allow you to participate in future distributions and potential price gains.
This trade, from our Covered Calls Table, offers a $1.60 call premium, plus the potential for $2.61 in price gains, ($30 call strike minus $27.39 share price). You’ll also receive NTI’s next distributions, unless NTI rises above $30 before the ex-dividend dates, and your shares get assigned/sold. NTI should announce its next distribution sometime around May 13th.

Earnings: NTI looks very undervalued on a 2013 PEG basis, but analysts are projecting much less growth for 2014. However, given its ability to pay very attractive distributions thus far in its short history, even if NTI just keeps its yield in the “double-digit realm”, its dividend yield should continue to attract investors, and support its share price in the future.

Financials: NTI’s ratios look better than its peers so far. It does carry more debt, but it has sufficient Interest Coverage and a strong Current Ratio:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short NTI put options at the time of this writing.

3 High Dividend Stocks Going Ex-Dividend Next Week

Posted on March 21, 2013

There are several dividend stocks going ex-dividend next week, (3/25/13 – 3/3/29/13) from the Financials section of our High Dividend Stocks By Sector Tables. The following 3 stocks are mortgage Real Estate Investment Trusts, or “mREITS”, as they are popularly known. They invest in mortgage-related securities, issued by government agencies, such as Fannie Mae and Freddie Mac, and use leverage to achieve high dividend yields.

Dividends: CMO increased its quarterly dividend to $.31, from $.30, while NLY and RSO maintained their dividend payouts this quarter. RSO maintained a $.25 quarterly dividend from late 2009 through 2011, but it dropped its quarterly payout to $.20 in 2012. Prior to the housing crisis, RSO paid as high as $.41. NLY dropped its dividend payout twice in 2012, to $.55, and then to $.50, before seemingly stabilizing at $.45 in Dec. 2012.

As REIT’s, they must pay out at least 90% of their income, in exchange for paying no corporate income taxes, hence their high dividend yields. Even with the decrease in dividend payouts, these yields are still quite high:

Current Valuations: The smallest stock by Market Cap, RSO’s P/E is closest to the low end of its 5-year P/E range, but CMO is the cheapest on a Price/Book basis:

Options: Although all 3 of these stocks have options, we don’t list them in our Covered Calls Table or our Cash Secured Puts Table, due to low options yields. However, there over 30 other high yield trades in each of those free tables, which are maintained daily.

Financials: All 3 firms have similar Returns On Equity. RSO carries the least debt, and lags in Return On Investment and Interest Coverage:

Performance/Ownership: RSO has outperformed CMO and NLY in 2013, and over the past 52 weeks, partly due to its higher support from institutional and inside buyers:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author owned CMO and NLY shares at the time of this writing.

A Tech Dividend Stock With Undervalued Growth

Posted on January 5, 2013

by Robert Hauver

Looking for Tech dividend stocks with growth in 2013? Many investors have taken note of the fact that the Tech sector grew its dividends fastest of any sector in 2012. Couple this with the potential for earnings growth in this sector, and it makes for a compelling dividend hunt.

We found a Tech stock which not only pays a regular dividend, but also recently paid a special dividend, and has a low PEG ratio for its upcoming fiscal year.

Founded in 1982, Maryland-based Tessco, (TESS), services organizations responsible for building, using and maintaining wireless broadband systems. It offers many different product lines, including base station infrastructure, installation test/maintenance, network systems, and mobile devices/accessories.

TESS is a micro-cap stock, with a $195 million market cap, and is listed in the Tech section of our High Dividend Stocks By Sector Tables, after the firm’s special dividend doubled its dividend yield.

Earnings: Tessco’s fiscal year typically ends at the end of March, so, even though the chart below shows much better growth in 2014 than 2013, Tessco’s 2014 fiscal year will begin soon, in April 2013:

TESS also had good growth in its most recent quarter, and a low .75 5-year PEG ratio. Using the 15% 5-year growth figure and a risk-adjusted discount rate of 10.89%, gives a $39.27 estimated value for TESS, which closed this week at $24.24:

Dividends: TESS did the right thing by its shareholders, by declaring a special dividend of $.75, when nobody knew what US dividend tax policy would be in 2013. With its low debt load, the company had the cash to do this. TESS has paid dividends since 2009, and has nearly tripled its quarterly payouts since then, going from $.0667, to the current $.18/quarter.

Unfortunately, TESS isn’t listed in our Covered Calls Table, or our Cash Secured Puts Table, as there are no options available for it at present.

Financials: Although TESS works on slimmer margins, this should be improving soon, as it is transitioning from a low margin business with a major Tier 1 carrier, to more profitable business elsewhere. Its management efficiency ratios and debt load look favorable vs. its industry’s averages:

Performance/Technical Data: TESS had quite a run in 2012, and is also up 8.7% for the first 3 trading days of 2013. This stock should be a good one to add to your watch list, and buy on the dips that will most likely happen when our pals in DC start doing the debt ceiling tango in a few weeks.

Disclosure: The author was long TESS shares at the time of this writing.

Disclaimer: This article was written for informational purposes only and isn’t intended as investment advice.

2 Top Defensive Dividend Stocks

Posted on October 12, 2012

by Robert Hauver

October 12, 2012

With many market observers wondering how long the summer/fall rally will last, we went looking for dividend paying stocks that outperformed the market during the spring pullback AND have also participated in this rally. Not surprisingly, we came up with 2 Utilities stocks, American Electric Power, (AEP), and Next Era Energy, (NEE). Next Era, based in Florida, was formerly known as FPL, (Florida Power & Light).

Both of these stocks are listed in the Utilities section of our High Dividend Stocks By Sector Tables.

Here’s how these 2 electric utilities stocks have performed as of 10/11/12, in both up and down markets. NEE did the best during the pullback, actually rising 4.69%, while AEP only fell -1.18%, while the S&P fell nearly 10%. AEP has reversed itself during the rally, rising over 14%, while NEE has risen 7.57% to date. As the table below shows, they both have risen double-digits on a Pullback vs. Rally net basis, while the S&P has risen just over 2% during the 2 periods:

Dividends: Both stocks pay quarterly dividends, and have increased them over the past 5 years. AEP’s dividend has grown from $.41 in 2007 to the current $.47 quarterly rate, while NEE has done much better, climbing from $.41 all the way up to $.60, a nearly 33% dividend growth rate:

Earnings Growth: As with most Utilities stocks, these aren’t big growth stories, since much of their earnings is regulated, but both firms are at least showing some growth for the past and future, although NEE’s EPS stumbled -3.14% in 2011:

Financials: Both firms have superior Management Efficiency Ratios and Operating Margins vs. their industry. They both carry a higher debt load than the Industry average, but they also have higher Interest Coverage Ratios:

Disclosure: Author held no AEP or NEE shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Diebold – This Solid Dividend Stock Just Sent A Buy Signal

Posted on September 27, 2012

by Robert Hauver

It’s often been said that “timing is everything”, especially when buying stocks. We went looking for solid dividend paying stocks which might be on the verge of rising. We came up with Diebold, (DBD), which just crossed above the oversold line on its stochastic chart, an event which is seen as a buy signal by technical traders:

Company Profile: 150 years old, and based in Ohio, Diebold is a leading global supplier of ATMs, and holds the leading market position in many countries around the world. Diebold also provides security and facility solutions, software solutions, and cross-disciplinary functions which include both hardware and software capabilities, and provides professional and managed services, transaction processing, and security services. Diebold’s primary customers include financial institutions, as well as government agencies, commercial enterprises and various retail outlets. (Source: Diebold website)

Diebold hit its high for the year, at $42.25, back in April, and has struggled since, falling to the mid-30′s in the Spring pullback, and hasn’t participated much in the summer/fall rally until recently. However, it’s up over 2.5% over the past trading month.

Earnings Growth: After bottoming out with a -$.31/share loss in 2010, DBD came roaring back in 2011, and is estimated to grow over 15% in 2012. Analysts’ 2013 earnings estimates range from $2.65 to $3.00 for 2013, which gives DBD a higher 1.27 2013 PEG ratio.

However, DBD just beefed up its operations in Brazil, by acquiring GAS Tecnologia, a leading Brazilian Internet banking, online payment and mobile banking security company. It serves many of the country’s leading financial institutions and protects nearly 70 % of Internet banking transactions in Brazil. Internet banking services only cover about 30% of the transactions within Brazil currently, and are projected to double every 3 years.

Dividends: DBD has an impressive 5-year dividend growth rate of over 19%, and increased its quarterly payout to $.285 in the 1st quarter of 2012, from $.28:

Options: If you want to improve upon DBD’s dividend yield, there are reasonably attractive call options available. Here’s a trade from our Covered Calls Table, that offers an option premium which pays over 3 times DBD’s quarterly dividends between now and February expiration.

The minimum income you’d receive in this trade is $2.81/share, ($1.70 in call premiums, plus $1.11 in assigned price gain, if DBD rises over $35.00, and your shares get assigned before you receive either of the 2 quarterly dividends. The maximum income you’d receive is $3.37, if you receive both dividends, AND your shares are assigned. However, it’s more likely that, if your shares got assigned, after receiving the first $.28 dividend, you wouldn’t receive the second one, since DBD’s ex-dividend date may fall on February 15th, the same day as this option expires. Hence, you’d earn $3.09, a 9%-plus yield over this 5-month term:

Diebold also has put options available, but the premiums aren’t that compelling at present. (You can find over 30 high yield trades in our Cash Secured Puts Table.)

Financials: Diebold has an impressive ROE, but does carry a bit more debt than industry averages. However it has an 8.3 Interest Coverage ratio.

Disclosure: Author held no DBD shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

A Stealthy Oversold High Dividend Stock With Growth

Posted on September 21, 2012

by Robert Hauver

We live in the Age of Information, where small investors can get an amazing amount of data on publicly traded stocks, just by clicking a mouse or touching a touchpad. But sometimes, it looks like the Age of Misinformation – Espy Mfg., (ESP), is a good case in point. Many of the finance websites that list a stock’s dividend history are overlooking something significant for Espy – a big special dividend that they’ve been paying out in December since 2008.

Consequently, many sites show Espy’s dividend yield as being below 4%, when it’s actually ranged from around 8% to well over 12% since 2008. The table below simply uses the year ending stock prices to determine dividend yields, but you could check on the yearly price ranges to come up with more data. 2008 also had another special dividend in March, which hasn’t been repeated:

(ESP is listed in the Industrials section of our High Dividend Stocks by Sector Tables.)

Even Yahoo, which has Espy’s dividend history correct, shows a current yield of only 3.60%. Why are the sites listing it incorrectly? Because it’s a “special dividend”, and there’s no guarantee of it happening each year.

So, will they pay it again in 2012? The special dividend is based on financial results for the most recent fiscal year, which ends on June 30th, and capital requirements for the current year. They’ve supported their dividends by paying out 90% of earnings and also using some Retained Earnings. Management prefers to reward shareholders, by utilizing some retained earnings, instead of earning next to nothing on this excess cash.

Judging by Espy’s earnings and current record order backlog, prospects look good for another $1.00 dividend in 2012, particularly as ESP already ramped up its manufacturing capabilities last year, in order to meet increasing demand. ESP’s order backlog grew by over 31% for its fiscal year ending 6/31/12, to $50.8 million.

Earnings Growth: Using the 2 lowest past Order Backlog-to-Sales Conversion rates, and the lowest Net EPS %, we came up with a fiscal 2013 EPS range for Espy of $2.17 to $2.43:

These 2 estimates translate into a 2013 PEG ratio ranging from a very low .55, up to 1.34.

Technical Buy Signal: In addition to most likely being undervalued on a PEG and P/Book basis, ESP just crossed above the oversold line on its Stochastic chart, which is seen as a buy signal by technical analysts:

Options: There are no call options or put options available for ESP.

Financials/Valuations: Excepting ROE, Espy’s ratios outshine the Defense industry averages, and it also looks undervalued on a Price/Book basis.

Company Profile:Espey Mfg. & Electronics Corp, located in Saratoga Springs, NY, is a Power Electronics Design and Original Equipment Manufacturing (OEM) company with a long history of developing and delivering highly reliable products for use in military and severe environment applications.

Espey’s primary products are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, ups systems, antennas and high power radar systems. The applications of these products include AC and DC locomotives, shipboard power, shipboard radar, Airborne power, ground-based radar, and ground mobile power.

Espey is on the eligible list of contractors on the United States Department of Defense and generally is automatically solicited by such agencies for procurement needs falling within the major classes of products produced by the company. (Source: Espy website)

Disclosure: Author was long ESP shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

This Hot High Dividend Stock May Still Be Undervalued

Posted on September 14, 2012

by Robert Hauver

Our quest for undervalued high dividend paying stocks keeps leading us back to the Energy sector, which took a beating in the second quarter, but has come back strong since late June. In a previous article, we wrote about Pioneer Southwest Energy, (PSE), an energy stock which had been left behind in the summer rally.

This article focuses on Calumet Specialty Products Partners, (CLMT), an LP which is a combo oil & gas processor/refiner. With its 8%-plus dividend yield, CLMT is listed in our High Dividend Stocks By Sector Tables. Unlike PSE, CLMT hasn’t been left behind this summer, and has greatly outperformed the S&P since late June. It also looks closer to being overbought than oversold on its stochastic chart:

Undervalued Thesis: Thanks to a series of acquisitions, CLMT had great growth in 2011, and thus far in 2012, with 2012 EPS estimated at $3.34 on average, a torrid 151% pace. Its long-term 5-year growth projection of 26.81% gives it a very low 0.36 PEG:

Here’s the rub – analysts are currently estimating a -3.89% downturn in EPS for 2013:

But analysts may be underestimating the 2013 earnings impact of CLMT’s acquisitions, if the last 2 quarters are any harbinger of what’s to come. CLMT earned $0.97 in the first quarter, and increased to $1.14 in the 2nd quarter of 2012, an approximately 87% to 100% increase over the previous year’s quarters.

So, if CLMT matches the lower, $.97 1st quarter figure over the next 2 quarters, it would earn $4.05 in 2012, and probably even more in 2013, since it has made more acquisitions since the 2nd quarter, which will be accretive to earnings:

(Source: Yahoo Finance)

Using a risk-adjusted discounted rate of 8.37% vs. future earnings also shows CLMT to be undervalued, with a whopping value of $132.97.

Dividends: After paying its first 2 quarterly distributions of $.63 in 2007, CLMT’s payout slipped to $.45/quarter in 2008-2009, but has increased steadily ever since – $.46 in 2010, form $.47 up to $.50 in 2011, and from $.53 to $.59 in 2012.

Even though it still looks undervalued on a long term basis, given the big run that CLMT has had…

You may want to wait for a pullback, or, alternatively, sell Covered Calls, to achieve a lower break-even cost.

Here’s a trade for CLMT from our Covered Calls Table, which lists 30 other high yield trades:

This 5-month trade offers a few different income scenarios:

1. Static – Maximum income of $2.48, (dividends and call premium), if CLMT doesn’t rise above the $30.00 call strike price near its ex-dividend dates, or at expiration.

2. Assigned – Minimum income of $2.15, ($.85 price gain + call premium), if CMLT does rise above the $30.00 call strike price near its first ex-dividend date, and your shares are assigned. Maximum income of $3.33 if CMLT gets assigned at expiration, AND you collect both quarterly $.59 dividends.

CLMT also has put options available, but the only high yield is on a $30.00 strike price, which is above the current price/share.

Financials: CLMT has good Mgt. Efficiency ratios, but does carry more debt than industry averages. However, it has 4.1 Interest Coverage Ratio. Its Operating Margins should improve, as it integrates its acquisitions.

Company Profile: Calumet is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial, and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana and has nine facilities located in northwest Louisiana, northwest Wisconsin, western Pennsylvania, southeastern Texas and eastern Missouri. (Source: Calumet website)

Disclosure: Author had no positions in any of the stocks mentioned in this article at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

A High Dividend Stock That’s Ready To Rise

Posted on September 7, 2012

by Robert Hauver

Looking for cheap high dividend paying stocks? MV Oil Trust, (MVO), has shown a recurring pattern of price troughs that rise into peaks as it approaches its quarterly ex-dividend dates, which fall around the 12th of January, April, July, and October. It recently crossed back above the oversold line on its stochastic chart:

Dividends: With its 11%-plus dividend yield, MVO sits atop the Energy section of our High Dividend Stocks By Sector Tables. By law, trusts are required to pay out at least 90% of their income in distributions, in return for not paying taxes. MVO’s next ex-dividend date should be around October 12th. (Trust dividends are referred to as distributions.)

Dividend History: MVO will need to pay out at least $.76 in October, to keep pace with its 2011 payout level. Judging by its earnings, (see below), this should be achievable.

Earnings: MVO is one of only of a handful of energy trusts which had strong earnings growth in 2011, (up over 25%), and in the most recent quarter. As noted below, MVO earns royalties from assets which are 98% oil, vs. only 2% natural gas, hence its advantage over natural gas trusts, many of which had been hurt by plummeting prices.

Profile: MV Oil Trust was formed in August 2006, by MV Partners, LLC. MV Partners conveys a term net profits interest to the trust that represents the right to receive 80% of the net proceeds from all of MV Partners’ interests in oil and natural gas properties, which are located in the Mid-Continent region in the States of Kansas and Colorado. As of June 30, 2006, the underlying properties produced predominantly oil from approximately 985 wells, and the projected reserve life of the underlying properties was in excess of 50 years.

Production from the underlying properties for the year ended December 31, 2005, was approximately 98% oil and approximately 2% natural gas and natural gas liquids. The underlying properties are all located in mature fields that are characterized by long production histories and numerous additional development opportunities to help reduce the natural decline in production from the underlying properties.

The net profits interest will terminate on the later to occur of (1) June 30, 2026, or (2) the time when 14.4 MMBoe have been produced from the underlying properties and sold (which amount is the equivalent of 11.5 MMBoe in respect of the trust’s right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest).

Options: There are no put options or call options available for MVO.

Disclosure: Author had no positions in any of the stocks mentioned in this article at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.