Just now added another 200 units of NGL at $11.19 after having placed the order at $11.20.
When you have a company paying 14.5% or so (yield) and it comes out the night before your possible trade---maintaining its usual 39 cent quarterly distribution---at a time that has many other MLPs reeling from sector roiling and either cutting distributions or going belly-up altogether? What do you do?
Well, for me, it's not ghost-busters. It's BUY-BUY-BUY!!!
Today's added 500 units are on margin. I've effectively paid $10.80 after we back out the soon-to-be distribution of 39 cents. My cost basis is now at $12.04 and that at least partially justifies my purchases of this morning. As for the use of margin? I pay 5.7% margin rate after obtaining it via consultation with a higher-up Ameritrade representative. I'd formerly refused to use the 8+% rate normally imposed.
If we look at my revised rate and compare it to what I stand to gain through distribution offsets and increasing capital appreciation, it's altogether obvious that this is a great way to enhance profit-opportunity. In simplest terms, I'm making out like a bandit within the boundaries of customary business management.
I'm not suggesting anyone use margin but if you do, there are ways to do it smartly. High yield distributions accelerate capital appreciation and through both we sometimes find unusual opportunity. In my case, I'm expecting to sell off some of my NGL position depth when units have risen appreciably. This will have immediate impact on my margin-fee exposure and enhance my overall bottom line.
Happy hunting, everybody.
And look at ALDW! It's a thing of beauty, wouldn't you say?
Be well!!!
