Big Dividends From American Oil, My Tesla Hedge

Many of my articles on Tesla (TSLA) on Seeking Alpha have some commenters that fall into one of these camps:

  1. Not convinced that Global Warming is occurring
  2. Not convinced that Global Warming is harmful
  3. Not convinced that humans are responsible
  4. Convinced that Electric Vehicles are dirtier than gas vehicles

This article is for all of them and for everyone else who would like to enjoy great dividends from American companies producing local American oil and natural gas. All the companies on this list are reasonably well covered at Seeking Alpha and with this article I hope to help you in finding high dividends from American oil producers.

American Oil Production

It surprises many when presented with the fact that America is the top oil producer in the world in 2013. Here is available data for 2013 from the EIA in Thousand Barrels/day.

The US has also been growing its production steadily.

At the same time imports are falling (graph is in thousand barrels).

America also leads the world in natural gas production. This is where things get interesting for investors. There is an American Oil and Natural Gas boom and there is ample opportunity for great dividends because a lot of the oil and gas production and transport companies are structured as Master Limited Partnerships – MLPs.

Currently many upstream (and to a smaller extent, pipeline) MLPs are trading at below normal values thanks to attacks by an analyst firm called HedgeEye on several large MLPs such as Linn Energy (LINE) and Kinder Morgan (KMP).

Thanks to the ongoing negativity, both those form my two favorite picks. If you are not a fan of K1s at tax time both the companies have alternative options: Kinder Morgan Management (KMR) and Linn Co. (LNCO).

I won’t go into much more detail here because both Linn and Kinder Morgan are heavily covered stocks. But I’ll say this much that in spite of the bad environment, Linn has managed two major acquisitions and a dividend increase is imminent. This has driven the stock back up into the 30’s but there is still room to grow. I believe that any dividend increase will push the stock back up to levels before the Hedgeeye attacks.

Here are the top 5 upstream MLPs in size and their dividends. Linn Energy is almost as big as the rest of them combined so before you invest, note that most of these are small companies.

Dividend % (As of 1/16)
Linn Energy 9.5
Breitburn (BBEP) 9.7
Vanguard (VNR) 8.3
EV Energy (EVEP) 9.1
Legacy (LGCY) 8.4

From the list it is easy to see that spectacular dividends are not hard to find from American Oil. Here are the total returns for them in the last 5 years.

LINE Total Return Price Chart

Every single one of them outperformed the S&P 500, which had total return 134% measured using SPY (SPY) over the last 5 years.

Conclusion

While my wife and me do a majority of our driving in an EV, are planning on getting solar panels and also invest in green energy companies, I treat our oil and gas investments – great dividends from the American oil and gas boom – as our hedge to green energy.

Disclosure: Long TSLA, KMP, LINE, LNCO, SPY

Stable 5% Dividends from Shipping Container Leasing Companies

Textainer (TGH) and TAL (TAL) are the leading shipping container leasing companies in the world. Both are similarly sized with similar dividend yields:

Dividend Yield Market Cap
TAL 5.25% 1.8B
TGH 5% 2.1B

Longer term, we need to pick the company with better dividend growth prospects.

Read the Full Article at Seeking Alpha

Make an extra 5% on Linn Energy

This article also appears at The Motley Fool.

I have been following the prices of LinnCo (NASDAQ: LNCO) and Berry Petroloeum (NYSE: BRY) for the last few months. LinnCo is basically a holding company for shares of Linn Energy (NASDAQ: LINE) and a means to invest in Linn Energy without the hassles of a K1.

Linn Energy expects to merge with Berry Petroleum, with the deal closing in the third quarter, a delay from the original expected close by the end of June caused by an SEC review. Investors in BRY will receive 1.25 shares of LNCO for each share in BRY. However, BRY has consistently been trading at at least a 5% discount to the deal value. On Friday, buying BRY at close would have netted you LNCO at 34.80, an 8% discount.

To add to that, thanks to persistent negativity by some analysts, including Barrons and others, both Linn energy and Berry have been tanking lately providing a great opportunity to get into an MLP with extraordinary dividends. Currently (as of Friday, May 31) the dividend for LNCO stands at 8.1%. Add to that the 5% extra you get from buying BRY instead of LNCO and you have a great deal.

The management of Linn has also announced that they plan to boost dividends further once the acquisition completes.

If you don’t care about the simplicity of LNCO or the hassle of a K1, then you could directly buy LINE for an even better deal. LINE closed Friday at just 32.90, another 5% off the price of LNCO and a dividend of 8.8%.

In short, if you were planning on acquiring shares of LNCO to take advantage of the current negativity in the stock, you would be better off buying BRY or LINE instead.

The Real Dividend Stocks and How to Find Them

This article also appeared at The Motley Fool.

I’m always on the hunt for good dividend payers so I try and read articles and posts on good dividend paying stocks mostly to come away disappointed with stocks paying 2% – 4% dividends. That is not good. Doesn’t matter if the dividend is growing or has been growing forever, a current yield of 2% or 3% is not what I would consider a good dividend stock.

Dividend stock lists often contain stocks like McDonald’s (3.5%), Wal-Mart (2.3%) and Pepsi (3.1%). All of them pay growing dividends and have paid dividends for a long time. Good stable companies whose dividend is not likely to reduce. But in my mind these are not “dividend” stocks. That’s like savings accounts calling 0.25% high yield.

I want yields of more than 4%, preferably more than 6% and the expectations of growing dividends. And it turns out that this is not a difficult problem at all. I simply needed more research. And here it is.

Let me start with my favorite dividend stock – Kinder Morgan. You have two options investing in Kinder Morgan — KMP (NYSE: KMP) and KMR (NYSE: KMR). They pay a dividend of 6% and 6.3%, respectively. KMP pays dividends in cash and KMR pays dividends in stock. KMP is a partnership and you have to deal with K1s at tax time, while KMR is like a regular stock. Both of these dividends are tax free until you actually sell the stock. Kinder Morgan is an MLP (Master Limited Partnership — a publicly traded partnership that is generally used by oil and gas pipeline companies) and there are several other MLPs that also pay good dividends. The industry as a whole is a good place to look for dividend payers.

Another good dividend paying stock is Verizon (NYSE: VZ) (4.8% dividend). Personally I prefer Verizon over AT&T (5.3% dividend) because as of now Verizon has invested in actually having a better network with more coverage. Also the stock has been performing better.

Another industry that pays good dividends is the Shipping Container Leasing industry. The leaders Textainer Group (NYSE: TGH) and TAL (NYSE: TAL) both pay excellent dividends of 5.6% and 6.8%, respectively.

To find these stocks I went through a stock screener looking for stocks yielding more than a certain percent and then looked up each one to see if the dividends were stable and growing, if the company actually made enough money to cover the dividends, and I’ve avoided companies and funds with complex financial business models that I don’t clearly understand.

Other dividend paying stocks I recommend are:

  • Waste Management – WM (4.2%)
  • Glaxo – GSK (5.3%)
  • B&G Foods – BGS (4.1%)
  • Transmontaigne Partners – TLP (6.7%)
  • Intel – INTC (4.3%)

in addition to the ones already mentioned in the article

  • Kinder Morgan – KMP (6.3%)
  • Verizon- VZ (4.8%)
  • Textainer Group – TGH (5.6%)
  • TAL (6.8%)

That is a good list to start with and you can always find your own gems by using a screener.

A Techie’s Guide to the Future of Tech Stocks: Microsoft

This is part of my series on Tech Stocks. So far I’ve covered Amazon and Apple. Next on the list – Microsoft (NASDAQ: MSFT). This article is also available at The Motley Fool.

Windows 8 has generally been positively reviewed on touchscreen devices (Windows Phones and the Surface Tablet). The new breed of Windows Phone devices, such as the Nokia Lumia and HTC 8X are top notch. However, as a desktop operating system, Windows 8 has been mostly panned and the biggest criticisms have been the lack of a start menu and a confusing mix of Modern UI (aka, the interface formerly known as Metro) and traditional Applications. My personal opinion about Windows 8 adoption being slow is that it was to be expected. Many enterprise customers are still just getting used to Windows 7. Nobody wants to switch to a new operating system so quickly, especially one that is more of a radical leap than usual. I have no doubts that eventually Windows 8 or maybe Windows 9 will be a major player across devices, but Microsoft is more than just the desktop.

Looking at the enterprise side, we use SQL Server at work, and with the newest versions from my personal experience, SQL Server is easier to use and manage than Oracle (NASDAQ: ORCL), while matching it in capabilities. Also, Windows is a very capable server Operating System, and Hyper-V seems to be very capable as a virtualization platform compared to VMWare (NYSE: VMW). From a developer standpoint, there is still nothing that beats Visual Studio.

Microsoft’s largest segment, the business division (which is Office and Outlook/Exchange) is doing just fine. There really is no alternative to that combo. The online alternatives to Office such as Google (NASDAQ: GOOG) Docs have some time to go before they can really replace Office/Exchange for the enterprise.

Microsoft’s online division is also gradually reducing losses. The entertainment and devices division still managed to eke out a slight profit in spite of the significant investments Microsoft is making in Windows Mobile devices.

Looking forward, I’d say it will be slower than expected growth for Microsoft on the mobile front. This is based on lower than expected Surface sales and high price of the Surface Pro. Windows Phone sales are a mystery. There is all kinds of conflicting information, with sales ranging from dismal to “strong.” Recently the CEO said the current sales are 4 times sales at launch, but with no real numbers. However, Windows phones are few in number and not so easy to find. Staff at retailers are not familiar with them and there are not enough demo units everywhere for customers to try them. That will change with time, and as Windows 8 propagates and people become more familiar with the Metro interface. Also, Nokia just got a head start on China’s largest carrier against the iPhone5. Windows Phone/RT will be like the XBox, and Microsoft will keep at it until eventually it turns a profit. The Xbox itself is doing spectacularly well, partly thanks to the Kinect.

As for Windows 8 adoption, it will improve as people see the new Ultrabooks. I know I was impressed when I saw the Ideapad Yoga, as were fellow geeks. The flexibility of Ultrabooks is something that Apple (NASDAQ: AAPL) doesn’t have yet.

On the Enterprise front, I believe Microsoft will gain market share. As an Enterprise Application Engineer, I know it is very difficult to switch out Enterprise Systems at any decently sized company, but Microsoft does offer a value proposition. It is not that hard, however, to switch from VMWare to Hyper-V. Also, new deployments might show a propensity to buy the most value for money system.

Microsoft’s online offerings are steadily improving. Maps, Skydrive (which I use regularly), Office 365, Bing, Outlook.com, etc. are all at a point where they are good enough in comparison to the competition.

So all this being said, where do I think the stock is heading? I like the 3.5% yield and I think long term the future is not as dim as analysts indicate. I might open a small position in Microsoft if the stock hits it’s 52 week low of around $25. As such, I see it as a slow growth but good dividend stock. Even though Microsoft’s income has risen, the stock has done nothing for 10 years:

I expect Microsoft to reach $35 in the near future (next three years), with a slow increase in income and consistent dividend growth.

Disclosure: Long AAPL, GOOG, NOK