Investors Alley

The Biden administration’s pause on approvals for new liquified natural gas (LNG) liquefaction projects has tanked the price of natural gas. The low prices will curtail production, eventually leading to higher prices.

This is the time to invest to profit from the price recovery – and here are my favorite ways to do it…

Natural Gas Futures (NG1) traded as high as $3.60 in late October and was around $3.30 with a runup during the first half of January.

On January 24, the Biden administration announced a “temporary pause on pending decisions on exports of Liquefied Natural Gas (LNG) to non-FTA countries until the Department of Energy can update the underlying analyses for authorizations.”

The announcement cratered the price of natural gas. Here is the year-to-date chart (courtesy of Magnifi) for the United States Natural Gas Fund (UNG), which holds natural gas futures contracts:

Most natural gas producers cannot profitably drill for gas at $1.50 metric million British thermal units (MMBtu). Gas production companies will dramatically slow the amount of drilling. Lower production will produce higher gas prices. Also, the export pause only affects LNG facilities that will come online several years in the future. They do not affect current demand, and the gas trading crowd will eventually figure that out and start to bid up the price of natural gas.

To profit from the natural gas price recovery, look at a couple of Marcellus pure-play gas producers and pair the upstream company stocks with their associated midstream stocks. The midstream companies pay nice dividends, giving you some income while you wait for the upstream producer stocks to pay off.

EQT Corp. (EQT), with a $15 billion market cap, is one of the top U.S. natural gas producers. For 2023, the company produced two trillion cubic feet of gas, an adjusted EBITDA of $3.0 billion, and $879 million of free cash flow.

Equitrans Midstream Corp. (ETRN) provides midstream gathering and transport services to the EQT production area. Equitrans Midstream yields 5.7%.

Antero Resources Corp. (AR) is a $7.3 billion market cap Marcellus and Utica-focused gas producer. For 2023, Antero produced 3.4 billion cubic feet per day. Antero is the most efficient producer of gas and natural gas liquids. The company expects to generate over $500 million of free cash flow in 2024.

Antero Midstream Corp. (AM) provides dedicated midstream services to Antero Resources. Antero Midstream currently yields 7.2%.

Natural gas has become one of the most important global energy sources. Demand growth will push up the price of natural gas. It could happen suddenly.

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13f filings got a lot of press last week at the deadline. As usual, all the focus was on what the well-known investors were doing in the quarter. The problem is that following these billionaires is probably not going to help you make money. There are way too many eyeballs viewing and acting on the

One of my favorite dividend growth stocks continues to fly under the radar.

Sure, the stock price has doubled over the last three years, but this company is just getting started on its growth trajectory.

And its latest div

My Monthly Dividend Multiplier service focuses on dividend growth stocks to generate long-term compounding total returns. Stock prices of companies that grow their dividends inevitably appreciate. I use the rough math that the compounding annual return will end up very close to the average yield plus the average growth rate.

The total returns are not readily visible through the shorter-term market gyrations. However, as you own this type of stock for years, the targeted returns will appear in your portfolio.

For the Monthly Dividend Multiplier portfolio, I look for stocks where the yield plus dividend growth total is in the low to mid-teens. I want the portfolio to appreciate, on average, by 15% per year. That compound growth level will double your account value every five years. My model portfolio has returned an average of 4.3% per quarter for the last four-plus years.

One of the Monthly Dividend Multiplier portfolio stocks recently announced a massive dividend increase for 2024. The initial announcement came in stealth mode, with the CEO announcing the 2024 dividend rate that will start paying in May.

For 2023, Blue Owl Capital Inc. (OWL) paid a $0.14 quarterly dividend, giving a $0.56-per-share annual payout. During the fourth quarter earnings management call, CEO Marc Lipschultz stated that the annual dividend would increase to $0.72 for 2024. The result is a 29% dividend boost for this year. Based on the current $18.00 share price, OWL yields 4.2% with the new dividend rate.

Three years ago, OWL traded for about $10.00 per share. At that time the dividend was $0.08 per share quarterly, $0.32 annually. The dividend has more than doubled, and the share price has almost doubled.

Blue Owl Capital has been a public company for a little over three years. It has a lot of growth ahead. The Blue Owl business is similar to Blackstone Inc. (BX), which has a $150 billion market cap; Blue Owl has a comparatively small $25 billion market value. OWL is one of about 20 stocks in my Monthly Dividend Multiplier recommended portfolio. I expect the investment to produce excellent returns over the upcoming years. But then, I expect the entire portfolio to put up great returns, too.

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Last week, in my 48-Hour Income service, we sold cash-secured puts on financial company B. Riley Financial (RILY) and software company Digital Turbine (APPS).  In 48-Hour Income, the goal of the service is to generate 1% to 3% returns per week by selling 2-day puts in certain stocks. RILY put premiums have been elevated for

Today, I want to talk to you about the biggest risk you face as an investor. Career risk. See, for most people on Wall Street, the most important goal every day isn’t to make you money. Instead, it’s to do whatever it takes not to get fired from a really good job. That’s career risk

As the Federal Reserve has indicated its willingness to keep interest rates higher for longer, the broader stock market has struggled with predicting the effects of rates staying up and also trying to predict when the Fed will get around to the initial rate reductions. Investors can take advantage of the higher-for-longer meme by investing in those high-yield stocks that benefit from rates staying up.

Business development companies (BDCs) operate under special rules that limit the leverage they can use and require these companies to pay out 90% of net investment income as dividends to investors. A BDC makes loans to small-to-medium-sized corporations and possibly equity investments.

BDC loan portfolios are almost entirely adjustable-rate loans to their client companies. Since these companies (the BDCs) don’t have much debt, net interest income grows as interest rates increase. The BDC sector has done tremendously well over the last two years as the Fed went with its steepest trajectory of rate increases in history.

I have four BDC stocks in the Dividend Hunter portfolio. They did tremendously well in 2023. I appreciated that they did not jack up their regular dividend rates; instead, they paid supplemental rates to share the high-rate benefits with shareholders. As a result, investors can count on continuing to receive the regular dividends if and when rates start to come down. That doesn’t mean regular dividends haven’t also increased. Three out of the four recommended BDCs are growing their regular dividends.

There are about 50 companies in the BDC universe. I like to use actively managed ETFs as a source for individual stock ideas. The top 10 Putnam BDC Income ETF (PBDC) holdings would be a good place to start your research. Several of my favorites are on that list.

Runway Growth Finance Corp. (RWAY) is a relatively new BDC that recently included a $0.07 per share on top of its regular $0.40 dividend. The shares went ex-dividend last week. I use it as an example because RWAY yields 11% on the regular dividend, and the supplemental dividend is bonus income.

I regularly discuss how BDCs operate in my Dividend Hunter newsletter subscribers. If this is a new high-yield category for you, or you want to get smarter about these interesting companies, grab a subscription today.

Energy midstream companies organized as master limited partnerships (MLPs) offer significant tax advantages to investors. However, there are a few “gotchas” with MLP investing, so it is essential to correctly structure how you get exposure to this very attractive type of income investment.

Let me show you. Believe me, you’ll be grateful you read this come (next) tax season…

An investor in an MLP is technically a limited partner. The distributions/dividends paid to LP investors are classified as non-taxable return of capital. The MLPs earn the cash, but the structure makes income paid non-taxable.

MLP investors receive Schedules K-1 to use at tax reporting time. The nature of the MLP structure keeps distributions paid tax-exempt. Distributions reduce an investor’s cost basis, so they would be recaptured taxwise if the investor were to sell the MLP shares.

K-1 reporting investments can cause significant tax problems if owned in a qualified plan, such as an IRA or Roth IRA. Do not own MLPs in your retirement accounts. You have been warned.

I recommend investing in MLPs through a packaged product. Investing through an MLP-focused fund eliminates the K-1 problems but should pass through the tax advantages.

Which brings me to the main point of this article. I recently learned that the J.P. Morgan Alerian MLP Index ETN (AMJ) is structured as an exchange-traded note (ETN). Yes, I realize it says so right in the name, but I had not paid close attention to this MLP sector product. AMJ matures in May 2024 and will then be replaced with a similar ETN with the symbol AMJB.

ETFtrends.com gives this explanation concerning ETNs:

ETNs are senior, unsecured debt securities issued by a bank. Unlike ETFs, ETNs do not own the underlying assets that their return tracks. Furthermore, the return of an ETN is linked to a market index or other benchmark.

The ETN structure was developed in 2006. ETNs made it easier for retail investors to invest in hard-to-access instruments, particularly within commodities and currencies.

While both will provide a Form 1099 for taxes (i.e., no Schedule K-1), a key difference between MLP ETNs and ETFs is tracking error. Tracking error can be a concern with MLP ETFs given fund-level taxation. However, ETNs minimize tracking error.

ETNs generally do not pay any dividend or interest rate payments to investors because they do not hold any portfolio securities, but MLP ETNs do pay a variable coupon linked to the cash distributions paid by the MLPs in the index.

In this case, I think using an ETN is the lazy way out. This fund structure is popular in Europe, where it is very difficult for ETFs to get trading approval in all of the different stock exchanges. That is not the case in the U.S.

Also, AMJ/AMBJ will pay fully taxable dividends as interest income. Investors will not get the tax benefits of investing in MLPs.

My recommended MLP investment is the InfraCap MLP ETF (AMZA). This fund pays monthly dividends and currently yields 8.4%. AMJ yields just 6.2%.What a deal—AMJ gives a lower yield that will be taxed at a higher rate.

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The European Economy is a hot mess.

There is no growth. Inflation is still a problem; it has been over a year since we have seen anything that resembles good news from Europe about the economy.

After decades of the economic dominance of the region, Germany has proven that following moronic energy and monetary policies can cripple even the most vibrant economy. They relied on Russia for natural gas.

They gave in to the Greens and reduced their use of reliable, safe nuclear energy.

I could go on running down the list of mistakes made by Germany, but that would be boring.

Suffice it to say that losing the economic powerhouse has not helped the region get back on track.

The wars in Ukraine and the Middle East are also having direct negative consequences for the Eurozone.

The European Central Bank is hoping to be able to lower interest rates this year and hopefully spur some growth in the area.

Energy prices will be the biggest obstacle to that objective.

As a long-term, patient, aggressive investor, there is only one possible course of action that I can consider.

It is time to go shopping for companies that trade at a steep discount on the value of their assets and are in solid financial condition.

MPC Container Ships ASA (MPZZF) fits the bill nicely.

The Norway-based container ship company is currently trading at just 80% of tangible book value.

Using my credit scoring system, the company is in no danger of facing critical financial distress anytime soon.

MPC Container Ships has 62 small to mid-sized container ships, and its fleet is 98.7% leased right now.

The company is well-capitalized and has far less leverage than many of its competitors.

MPC Container Ships recently upgraded its revenue and cash flow estimates for 2023.

The current revenue backlog is $1 billion, with an average of 1.7 years left on its existing contracts.

Management intends to pay out 75% of net profits after capital expenditures and other expenses are paid.

The company may also pay extra dividends if it sells ships at a profit or has other extraordinary gains.

MPC Container Ships is a dividend machine.

Look at the estimated payout for 204 and 2025 from its most recent investor presentation:

MPC Container Ships has low leverage and can easily pay its bills.

The expected dividend payouts are enormous.

The current valuation is a discount to the fleet net of debt scrap value.

Patient-aggressive investors should see massive profits from huge dividends and appreciation over the next several years.

I have been told that it is a cardinal sin in the newsletter game to talk about foreign stocks, especially those traded over the counter with an extra letter in the symbol. The more I hear that, the more interested I am in talking about and investing in them.

Investing at the bottom of a recession in a developed economy has historically led to enormous gains.

That should be the case with judicious investments in deeply undervalued European companies and assets during the current pessimistic climate.

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Over the last couple of years, ETF sponsors have flooded the market with new funds that use options strategies to enhance income or protect principal values. These funds use very advanced options strategies to achieve their goals, so by definition, they are not easy to understand or evaluate. Our Investors Alley team has assembled a

The Permian basin is one of the most active oil and gas regions. Over the last year, over 30 billion barrels of oil have come out of the ground in West Texas and New Mexico, and the experts expect that there are still another 30 billion barrels remaining. All the major oil and gas companies