Today opened with lackluster makeup on the face of NGL. On the heels of news that the distribution coming up in three weeks or so will be 39 cents, one would think that's an angry uh-oh! in the making. Don't be fooled!
There are machines out there, playing against every bit of favorable news and doing all in their arsenal of tricks and mind-games to take advantage of us mere humans inextricably tied to the one thing that truly separates us from our machine "cousins"-minds.
When an MLP states that its BOD is going to be paying such-and-such for the next quarterly payout, make no mistake: It is going to pay that amount! This is not a "maybe" or anything at all resembling that as the SEC would undoubtedly zoom in like a hoard of bloodthirsty vultures, ready to penalize the bird-crap out of NGL.
So here we are on the cusp of a new era in the energy sector, having presumably weathered the worst of oil's downturn and we learn that we are about to receive 39 cents for each unit held. Mind you, this is on top of some us having sold all or part of our earlier-held positions for sweet profits. And those doing as I've done rebuilt those priorly sold positions and now sport pretty nice cost base distinctions. My current cost basis is $10.91. With 6,700 units in tow, I'm sitting on a $54,100 gain after having paid for my ALDW position (8,000 units) with NGL money.
Now, for the juicy part:
Nobody should think for an instant that 39 cents is anything to sneeze at. Granted, it's not much more than 8% but---it is money in the bank! And it will be placed in YOUR bank if you happen to be holding units by the critical date coming up soon. And don't be so foolish as to dare to think that the revenue stream ends with this payout for we have good reason to expect more of the same if not more as we move forward in time.
NGL has figured out how to survive in a hostile climate for energy. And the company is holding fast to its earlier pledge of $1.56/year. And we have proof it has figured things out for now. But there's a great kicker in this:
The usual protocol for energy-based MLPs comes with the expected severe drop-off in unit valuation immediately following the distribution. I think that this time it will not be severe at all. If I'm right, today's price might actually be a good buy for a six month hold, or greater.
I would have added units myself this morning were it not for my determination to hold onto the available cash.
And last but not least---when did 8%+ NOT sound awfully good? This is guaranteed money, nothing speculative about it. Even on a mark-to-market basis, when was the last time we could grab a 2% profit on our money committed for just a month or so? Multiply that by twelve and we're recognizing an outstanding rate of return with virtually little to no risk.
Invest at your own peril but doing nothing imperils an investor's very being.
AI
