ROGER S CONRAD CAPITALIST TIMES WASHINGTON DC AAII MARCH 2017 IN STOCKS WE TRUST PICK YOUR OWN STOCKS WHATS IN AN INDEX COMPANY OF DJUA NextEra Energy Inc 150 Duke Energy Corp 93 ID: 590826
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HIGH YIELD INVESTING IN THE TIME OF TRUMP
ROGER S CONRADCAPITALIST TIMESWASHINGTON DC AAIIMARCH 2017Slide2
IN STOCKS WE TRUSTSlide3
PICK YOUR OWN STOCKSSlide4
WHAT’S IN AN INDEX?
COMPANY
% OF DJUA
NextEra
Energy Inc
15.0
Duke Energy Corp
9.3
Edison International
9.0
Consolidated Edison
8.8
Dominion Resources
8.7
American Water Works
8.7
American Electric
Power
7.5
PG&E
Corp
7.5
Southern
Company
5.7
Public
Service Enterprise Group
5.1Slide5
DIFFERENTIATION MATTERSSlide6
WHAT’S IN AN INDEX?
MLP
% OF ALERIAN INDEX
Enterprise Products Partners
18.8
Energy Transfer Partners
9.2
Magellan Midstream Partners
8.9
Plains All-American Pipeline
6.2
Williams Partners LP
5.0
MPLX LP
4.9
Buckeye
Partners
LP
4.7
ONEOK Partners
LP
4.1
Sunoco Logistics Partners LP
3.1
Western Gas Partners LP
2.4Slide7
OUR ADVISORIES
www.conradsutilityinvestor.com www.capitalisttimes.comwww.energyandincomeadvisor.com
Pig Versus Bear Deep Dive InvestingEmail: service@capitalisttimes.com
CALL SHERRY 877-302-0749Slide8
SIX BRIEFING OBJECTIVES
WHO WE AREWHY INCOME INVESTING?BEYOND THE BLUSTER: WHAT TRUMP POLICIES REALLY MEAN FOR INVESTORSSECTOR BY SECTOR LOOK AT WHERE HIGH YIELD INVESTMENTS STAND
ADAPTING YOUR PORTFOLIO TO TRUMP-A-NOMICS: SOME RECOMMENDATIONSFOR MORE: REPORTS AND SLIDESSlide9
INCOME STILL WORKS
THE BIRD IN THE HANDGROWING DIVIDENDS BEST INFLATIONLATER IN THIS PRESENTATION: A DIVIDEND STOCK YIELDING OVER 9% THAT WILL GROW ITS PAYOUT 10% THIS YEARTHE FED: NOT THE HAZARD YOU THINK
TAX RATES MAY FALL AGAINDIFFERENTIATION IS CRITICALSlide10
UTILITIES SINCE THE FED ACTEDSlide11
RISING RATES CAN BE BULLISHSlide12
THEY’RE STOCKS, NOT BONDSSlide13
DIVIDENDS DAY OF DOOM?Slide14
WHAT’S HE SIGNING?Slide15
MORE QUESTIONS THAN ANSWERS
TAXES AND HEALTH CARE: CAN THEY PASS? WILL CHANGES HELP OR HURT GROWTH?INFRASTRUCTURE BILL: SO MUCH FOR THE FIRST 100 DAYS, IS 2018 A PIPE DREAM TOO?REGULATION ROLLBACK: STATES AND COURTS HAVE A SAY
KEY POSITIONS STILL UNFILLED: FERCSHRINKING GOVERNMENT: CONTRACTIONARYTHE LAW OF LOFTY EXPECTATIONS AS THE BULL MARKET ENTERS YEAR 9
FOCUS ON COMPANIES, NOT THE GRANDIOSESlide16
ONE EXAMPLE: UTILITIESSlide17Slide18
TRUMP AND PIPELINES: BULLISH?
OBAMA FERC STREAMLINED PIPELINE APPROVAL PROCESS = RECORD APPROVALSNATURAL GAS THE KEY TO CUTTING CO2 WITHOUT SKYROCKETING ELECTRIC RATES
FERC NOW LACKS A QUORUM: PROJECT APPROVALS STALLED UNTIL TRUMP APPOINTS NEW COMMISSIONERSWILL TRUMP THUMP GAS TO FAVOR COAL?STATES AND COURTS HAVE THE LAST WORDSlide19Slide20
WHERE’S THE SLACK?Slide21
HIGH YIELDS BY SECTOR
BONDS: LOW QUALITY HAS THE EDGEUTILITY STOCKS: UNDERVALUED GROWTHYIELDCOS: BAD RAP MEANS BIG VALUEENERGY MLPS: WHO MAKES IT AT $50< OIL?
SUPER OILS: STILL BEDROCK?REITS: THE REAL VALUE IS SPECIALIZINGBEYOND THE DOLLAR: BIG YIELDS OUTSIDE USSlide22
TREASURYS SWIM UPSTREAMSlide23
UTILITY JUNK PROSPERSSlide24
BONDS: IS THE CORE BUSINESS GETTING STRONGER?
WHY NOT INVESTMENT GRADE?IS REVENUE SUSTAINABILITY IMPROVING?REFINANCING RISKS MANAGEABLE?HOW PROTECTED ARE WE FROM VOLATILITY IN COMMODITY PRICES? ECONOMY? LEGISLATION AND LEGAL TURBULENCE?
ANYTHING LEFT IN A BANKRUPTCY?KEEP IT SHORT: 5 YEARS OR LESS TO MATURITYSlide25Slide26
A HIGH PRICED SECTOR…Slide27
…WITH MANY GROWTH CATALYSTS
DIVIDEND GROWTH ACCELERATES FROM LOW SINGLE DIGITS TO MID/HIGH SINGLE DIGITSGROWTH FUELED BY CAPITAL SPENDING ON SMALLER PROJECTS WITH HIGH PROBABILITY OF EARNING A FAIR RETURNUTILITIES’ TECH CONNECTION
REGULATION IN THE STATES FAVORABLEREFINANCING RISKS ARE LOWSlide28Slide29
TECH PREFERENCESSlide30
DOD: A MAJOR ENERGY CONSUMERSlide31
DOD PRIORITIES
CUT FUEL COSTSENSURE RELIABILITY AT THE BASE AND ON THE BATTLEFIELDSIMPLIFYING LOGISTICS SO PERSONNEL CAN DO THEIR JOBS MORE EFFECTIVELY AND SAFELYCLIMATE CHANGE CONSIDERED A MAJOR 21
ST CENTURY THREATBIG PRESENCE AT ARPA-E ENERGY SUMMITSlide32
DOD GOING GREENSlide33Slide34
RENEWABLES ARE FOR REALSlide35Slide36Slide37
AES CORP (NYSE: AES)—BUY<15
CHEAPEST STOCK IN DJUA:
YIELD 4.36%, 9.1% GROWTH LAST 12 MONTHSP/E 10.3X TRAILING 12 MONTHS EARNINGS, DJUA IS 18.6X
PRIMARY REASONS:INVESTMENTS IN SEVERAL EMERGING MARKETS
SUB-INVESTMENT GRADE RATING OF BB (STABLE) FROM S&P
LONG MEMORIES OF 2001-02 MELTDOWN
KEY CATALYSTS IN 2017:
VISIBLE GUIDANCE OF 8-10% ANNUAL EARNINGS AND DIVIDEND GROWTH THRU 2021
GLOBAL FRANCHISE IN OPERATING ENERGY STORAGE
S-POWER ACQUISITIONSlide38
HOW GRID STORAGE WORKSSlide39
THE DUCK CHARTSlide40Slide41
AES GAINS MARKET SHARESlide42
ALT ENERGY BASICS
PLANT ECONOMICS INCREASINGLY IMPORTANT WITH TAX CREDITS EXPIRINGCOMPONENT COSTS CONTINUE TO PLUNGEGRID INVESTMENT MUCH EASIER TO RECOVER THAN NEW FACILITIESREPOWERING FACILITIES ATTRACTIVE
REGULATORY SUPPORT AT STATE LEVEL CRITICAL Slide43
SOLAR RADIATIONSlide44Slide45
FALLING COST OF SOLAR PANELSSlide46
COMPONENTS MAKERS SLAMMEDSlide47
PATTERN ENERGY GROUP (NSDQ: PEGI)—BUY<22
YIELD: 8.5%
12-MONTH DISTRO GROWTH: 8.6%Q4 PAYOUT RATIO: 27.2%DEBT DUE THROUGH 2019: $35 MILQ4 CAFD GROWTH: 44%
KEY GROWTH CATALYSTS:GLOBAL WIND AND SOLAR DEVELOPMENT PIPELINE AND ROFO—PATTERN 2020
CLOSING DISCOUNT TO NEP AS ACCOUNTING ISSUES RESOLVED
ABILITY TO MEET 15% CAFD GROWTH GUIDANCE
POTENTIAL TAKEOVER BY PRIVATE CAPITAL OWNERS IF SHARES REMAIN AT DEPRESSED LEVELS: RIVERSTONE (19.41%), CARLYLE (19.41%, CI INVESTMENTS (12%)
ANALYST COUNT: 13B, 3H, 0SSlide48
PATTERN’S PORTFOLIOSlide49
PATTERN FOR GROWTHSlide50
2017 OUTLOOK: CYCLE BASICSSlide51
NATURAL GAS: 20-YEARSSlide52
NATURAL GAS: A GROWTH STORYSlide53
MEXICO GAS PRODUCTION…
.Slide54
ENERGY TRANSFER’S BILLIONSSlide55
PICKING PIPELINE MLPS
WISE SELECTION IS CRITICAL: SECTOR RECOVERY MASKS RISKSKEY FACTORS: LEVERAGE, ABILITY TO MOVE FORWARD ON KEY PROJECTS, EXPOSURE TO WEAKER BASINSDISTRIBUTION COVERAGE RATIO IMPORTANT BUT MAY NOT INDICATE SUSTAINABILITY
MERGERS USUALLY POSITIVE BUT NOT ALWAYS—ROLLUPS ARE A TRENDSlide56
ENABLE MIDSTREAM PARTNERS (NYSE: ENBL)—BUY<19
YIELD: 7.8%NO DISTRIBUTION INCREASES SINCE NOVEMBER 2015
Q4 PAYOUT RATIO: 54.1% Q4 DCF INCREASE: 32%DEBT DUE BY END 2019: $950 MILKEY CATALYSTS:
CONTINUED STRONG GROWTH OF VOLUMES IN SCOOP/STACKRETURN TO DISTRIBUTION GROWTH BY 2018
SETTLING THE OWNERSHIP QUESTION: CENTERPOINT TO SELL OR HOLD ITS 41.93% LIMITED PARTNER STAKE AND 50% OF GENERAL PARTNER?Slide57
CAPACITY SHORTAGESlide58
ENABLE DEBTSlide59
BIG OIL PROS AND CONS
PROSGUARANTEED SURVIVORS
RELIABLE DIVIDEND GROWTHACCESS TO LOW COST CAPITAL FUELING GROWTHACCESS TO DIVERSE MARKETS AND ABILITY TO DO BIG PROJECTSFRIENDLY WHITE HOUSE
CONS
HARD TO REALIZE MEANINGFUL PRODUCTION GROWTH
MOST TOOK LARGE LOSSES FROM BETS MADE AT $100 OIL
MANY EXPOSED TO POLITICAL RISKS
LONG-RUN ENVIRONMENTAL CONCERNSSlide60
CHEVRON: THE LONG VIEWSlide61
TOTAL SA (PARIS: FP, NYSE; TOT)—BUY<55
YIELD: 5.24%
12-MO DIVIDEND GROWTH: 1.6%2016 PAYOUT RATIO: 64.6%MOODY’S CREDIT RATING: Aa3 (Stable Outlook)OWNS LEASES ON LAND UNDER VITAL INFRASTRUCTURE
12-MO PRODUCTION GROWTH: 9%KEY GROWTH CATALYSTS:EXPECTED 4% OUTPUT GROWTH IN 2017
DIVIDEND GROWTH AS COMPANY NEARS FREE CASH FLOW POSITIVE AFTER CAPEX DECLINES, OPERATING COST REDUCTION AND CASH FLOW GROWTH
DOWNSTREAM OPERATIONS IN SOLAR ENERGY EXPANDING RAPIDLY GLOBALLY
FRENCH ELECTION THIS SPRING IS A WILDCARD: USD GAINS ADD TO EARNINGS IN EUROSSlide62
REITS ROCKET HIGHERSlide63
PICKING REITS
STANDARD PROPERTY OWNERS ARE NOT CHEAP: BBREIT INDEX YIELDS 4.5%NICHE REITS (DATA STORAGE) HAVE SCORED HUGE GAINS OVERBUILDING, SECULAR DECLINE OF BRICKS AND MORTAR, HIGHER INTEREST RATES ALL ARE CONCERNSSTILL SOME VALUESSlide64
LANDMARK INFRASTRUCTURE PARTNERS (NSDQ: LMRK)—BUY<17
YIELD: 9.1%
12-MO DIVIDEND GROWTH: 7.7%2017 DIV GR GUIDANCE: 10%Q4 COVERAGE RATIO: 0.81X2017 COV GUIDANCE: 1.05X
Q4 DCF GROWTH: 38%OCCUPANCY 97%, CONTRACTS MEASURED IN DECADESKEY GROWTH CATALYSTS:
DISTRIBUTION GROWTH AND IMPROVING COVERAGE RATIO AS EARNS FULL QTR CASH FLOW ON ASSETS DROPPED DOWN IN DEC
YIELD AND DISTRO GROWTH
GROWTH OF MARKET CAP ($343 MIL), ANALYSTS 6B, 0H, 0S
INSIDERS BOOST HOLDINGS BY 51.5% LAST SIX MONTHSSlide65
CANADA’S SHALE PLAYSSlide66
ALTAGAS LTD (TSX: ALA, OTC: ATGFF)—BUY<32
YIELD: 6.8%12-MO DIVIDEND GROWTH: 6.1%
Q4 PAYOUT RATIO: 50.6% Q4 NFFO GROWTH: 18%2-YEAR DEBT DUE: CAD551 MILKEY CATALYSTS:
DIVIDEND GROWTH—NEXT INCREASE IN JULYWGL MERGER TO ACCELERATE GROWTH IF APPROVED
RECOVERY OF CANADIAN ENERGY PATCH AS NON-US EXPORT CAPACITY GROWS
OPPORTUNITY TO INVEST IN POWER INFRASTRUCTURE IN ALBERTA AS PROVINCE PHASES OUT COAL-FIRED ELECTRICITYSlide67
CT ADVISORIES/COVERAGE
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www.energyandincomeadvisor.com ($649/YR)PIG VERSUS BEAR ($1,999/YR)
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