JotCast | 11/25/25 Capitalist Times Live Chat

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11/25/25 Capitalist Times Live Chat

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Bill D.

5:58

Just logged on. Why the weakest in ET?

Roger Conrad

5:58

Hi Bill. Energy Transfer shares are down about -10% year to date. That's an underperformance of some midstream companies this year. But if you look back over the previous four, the price is more than tripled and the dividend has more than doubled.

More important, business and the balance sheet are arguably the strongest in company history--the result of successful acquisitions combined with debt reduction the past few years.

I always want all my stocks to post big gains every year. But ET is doing well and I'm confident it will return to the winners' column on its next leg up in this energy upcycle.

Roger Conrad

6:02

There was a question about Peyto earlier in the chat that Elliott has asked me to answer. Basically, this has been a very low cost, financially strong natural gas producer operating in western Canada since I started watching it more than 20 years ago. it's coming off a strong Q3 with rising output and lower costs at a time when Canadian natural gas is being unlocked by Pacific coast export infrastructure. We track it in the "Canada and Australia" coverage universe of EIA. Look for a piece on Canadian LNG in an upcoming issue of EIA. But Peyto is a good one to own.

Frank

6:04

In the most recent EIA you said Plains PAA will increase their dividend in the mid single digits going forward, but in their conference call the CFO indicated that they expect the next raise to be .15 cents, and they'll continue to raise by that same amount each year until they reach their 1.6X threshold

Roger Conrad

6:04

Hi Frank. Well, that's the kind of thing I very much like to be wrong about!

But the bottom line is the amount of a dividend is always at management's discretion. I liked Plains at a lower expected dividend increase. I like it a lot more at this even higher level--which I think is backed up well by cash flow.

Frank

6:07

Looking at Tourmaline I stumbled upon Topaz Energy TPZEF which I believe was their royalty co. spinoff. I assume it's gas heavy, and Tourmaline looks to be lessening their position. Only paying out I believe 60%. Any thoughts on this royalty co.?

Roger Conrad

6:07

As I said answering the very same question a bit earlier, Topaz is one I will take a look at and possibly add to coverage in coming months.

Bottom line is royalty trusts share the wealth with investors--when oil and gas prices rise, so do dividends and share prices. We're bullish on the commodities the next few years. So we're generally bullish on royalty trusts.

I will point out that this one trades OTC in the US, rather than NYSE as Black Stone and Dorchester do. The yield is also considerably lower.

Tommy

6:16

InCUI+, one of the recommendations is HMC. What do you think will be the impact of tariffs on Japanese cars, in particular HMC?

Roger Conrad

6:16

Hi Tommy. Tariffs have been an issue for the global automobile industry's supply chains since I added Honda to the CUI Plus portfolio. The main issue though isn't whether they are affected or not--they most certainly are. Rather, it's whether they're better able to deal with the impact than their competitors in this country. And the answer is also yes, thanks to their sizable production capacity in North America.

In the November CUI Plus, I highlighted Honda's calendar Q3 results, which included a reduction in 2025 guidance back to where it had been before the summer guidance raise. That knocked the stock back from the low 30s to where it is now around 30. But the primary reason was not US tariffs but competition in Asia and some signs of softer global growth.

The position is still well in the black. But I'm comfortable holding it as the company is showing resilience. And it's already priced for a downturn at less than 10X earning--wouldn't take much good news to see it in the mid-30s.

Don C.

6:23

Elliott/Roger—Clearly, their appears to be some tension between President Trump and Prime Minister Carney of Canada. Should that be a concern with my holdings in TRP, PBA, SU or CNQ? Thanks for all you do.

Roger Conrad

6:23

Hi Don. I don't think so. Pembina operates almost entirely in Canada--except for the Alliance Pipeline that operates under contract. Suncor and Canadian Natural Resources are basically all Canadian.

TC Energy is probably the most exposed to real border disruption, as it operates in the US, Canada and Mexico. But here too I think the actual risk of political tension have a real impact on their earnings s pretty negligible. Having to cancel Keystone XL in the previous administration did have a real impact. But there's no exposure of that magnitude right now.

I will also point out that US/Canada tension is very much playing to these companies' advantage right now--as the Carney government is supporting new pipelines and other infrastructure to help Alberta as no government in Canada ever has. And the projects and dollars are only starting to ramp up.

Dudley

6:29

Afternoon guys, thanks again for these chats. With a12 month timeframe which utility offers more price appreciation potential…….D or NEE? Also your views on WPC? Thanks

Roger Conrad

6:29

Hi Dudley. I already answered your question on Dominion and NextEra.

WP Carey is a strong buy at 70 or lower. The company has now almost completed its transition to a single-use, logistics and industrial property focus--and investment conditions have greatly improved this year. The company's investment target for 2025 has roughly doubled since February. That's enabled it to boost 2025 FFO guidance twice.

I discuss earnings, guidance and prospects at length in the November CUI Plus, and again in the November REIT Sheet that just posted today. If you're not currently a member, check them out by calling Sherry anytime M-F, 9-5 at 877-302-0749.

We are getting close to the Thanksgiving holiday. So you might want to phone tomorrow if you're interested. Not to brag, but I think I have the best REITs coverage you'll find anywhere. And prices are about as low for the best in class as you're going to see.

Frank

6:33

I own TPL for their water business and the their vast Permian land holdings. I see a lot of folks also buy into Landbridge (LB); Waterbrige (WBI) and even Lightbridge. Waht's with all the "Bridges" lately?

Roger Conrad

6:33

You might also want to check out Western Midstream (NYSE: WES), which we added to the EIA High Yield Energy List last month. It's recently become a top 3 integrated player in the Permian frac water business with the acquisition of Aris. And its leading shareholder and customer Occidental Petroleum (NYSE: OXY) finally appears ready to focus on oil production again--which is bullish for volumes.

Western also yields over 9% with plenty of coverage and strong balance sheet--so that dividend is going to keep rising.

No "bridge" in the name--but what can you do?

Guest

6:39

Hi Roger: 2 questions about PAA and MPLX and future dividend increases. PAA's annual dividend increased almost 30% from 0.83 cents to $1.07 from 2022 to 2023. Then from $1.07 in 2023 to $1.27 in 2024 (about 20% increase). Then from $1.27 to $1.52 from 2024 to 2025 (another 20% increase). These 3 years of dividend increases are crazy good!!! How does PAA decide how much to increase and what criteria do they use? You recently opined that we should expect a "mid-single digit percentage payout boost in January". How did you determine that? Or has PAA told us that? Then MPLX's 12.5% "monster" dividend (as recently described by you) apparently took everyone by surprise, even you! Does MPLX ever TELEGRAPH what percentage dividend increase they will initiate? For those of us who are retired and live off of these dividends, ET, PAA and MPLX are godsends. Any precise or concrete dividend expectations for them in 2026? Thanks. Barry

Roger Conrad

6:39

Hi Barry. As another reader pointed out during the chat, I was too conservative with my forecast for Plains' next dividend increase. I had thought they would ramp up more gradually back to the level they paid 10 years ago. But they're wiling to live with eventual coverage of 1.6X, so they're going to get there faster.

Bottom line: Dividend growth is entirely at management's discretion--they need Board approval but that's going to be basically a given. The best way for investors to look at it always low ball the next increase, based on a higher coverage ratio, say 2X for Plains. If you like the stock at that level of increase, you'll love it if management is more generous--provided the coverage is good and balance sheet is strong.

Same with MPLX--i certainly didn't mind being wrong on the size of the increase there either. But again, it's at management's discretion and we have no reliable way of predicting what they're going to do next. Low ball the estimate and be pleasantly surprised if they beat.

Arthur

6:46

Hi Gentlemen, out of curiosity, why is it that BEP and BEPC sometimes behave so differently? The other day, BEPC was up almost a percent, and BEP was down 1/2 percent. I get that they have different forms of ownership, but I thought they would move in lock step. What am I misunderstanding?

Roger Conrad

6:46

Hi Arthur. It has nothing to do with Brookfield Renewable's business performance or anything to do with the company. And BEP and BEPC pay the same dividend and represent the same amount of ownership.

You could make a case that BEP's tax deferred dividends over the year represent a liability BEPC shares don't have. But that's irrelevant to anyone making a purchase as tax basis is the buy-in price, whether it's BEP and BEPC.

Rather, the difference in price performance reflects the relative popularity of C-Corps versus MLPs in the current market. It is true that some large institutions won't buy MLPs. But other than that, it's pure sentiment--just as there are no economics to justify why MPLX is priced to yield 8% while WMB is around 3%.

As I've earlier in the chat, barely a decade ago, it was MLPs that traded at a premium to C-Corps. And C-Corp midstream companies were under heavy pressure from Wall Street to either convert to an MLP or else spinoff some assets into one.

Roger Conrad

6:48

Then the rationale was converting to MLPs would increase tax efficiency and earn a higher valuation. Not one in 100 MLP fans would have believed that 10-12 years later, MLPs would trade at such massive discounts to C-Corps in the same business--or in Brookfield's case the same company. And not one in 100 can see a future where MLPs don't trade at massive discounts to C-Corps. But markets always return to the mean.

6:50

Bottom line: I have no idea when MLPs will gain ground on C-Corps. What I do know is I can get a tax advantaged yield 3X or better from and MLP--that in many cases (MLPX, PAGP) is growing far faster. That's worth the K-1 at tax time, no matter how long it takes for the MLPs vs C-Corp popularity contest to reverse again.

Dave

6:57

Is the Black Hills purchase/merger really additive? Does Black Hills simply acquire more fire risk management problems?

Roger Conrad

6:57

Hi Dave. No merger between regulated utilities has ever failed to create a stronger and more resilient company. And there's 125 plus years of literally hundreds of deals that prove it. They're demonstrably harder to get done than acquisitions of unequals--you've got to have an agreement between management teams that you can then sell to regulators and investors. And these deals aren't as flashy as straight up takeovers, that frequently include big premiums to pre-deal prices. But the industrial logic of scaling up these ultimately very similar businesses is extremely strong.

In this case, the parties are near each other regionally. That means not only cost efficiencies and improved procurement pricing power and a bigger stronger balance sheet--but also the ability to pool workers and other resources to get more bang for the buck.
I would actually say the opposite about dealing with wildfires. A larger company will have increased ability to fund new technology based solutions to cut risk such as employing

Roger Conrad

7:00

artificial intelligence for improved detection and response. Wildfire risk is real in the West. But one big companies run well will have more resilience than two smaller ones independently. And unlike any other industry, these companies run similarly enough for management to securely realize those synergies.

7:02

So yes, I am bullish on Black Hills/Northwestern--just as I am American Water/Essential Utilities. There were no big premiums with either deal. And that's disappointed some. But the long-term benefit of both should be immense--creating a bigger, stronger and more resilient company able to invest more in networks and growth.

7:03

Well, that looks like all we have for this month's live webchat! We'd like to thank everyone for joining us today. And we sincerely hope you have a very Happy Thanksgiving, whatever your plans may be.

7:04

As always, we will be sending you a link to a transcript of the complete Q&A tomorrow morning. If for some reason your question wasn't fully answered, please write us at service@capitalisttimes.com and we will get to it as soon as we can.

RBB

7:07

Wanted to slip in a quick shout out to you guys (Elliot & Roger), Sherry and today's participants. Hope one and all will have a peaceful and pleasant holiday . . . digesting all the insight and information shared today.

Roger Conrad

7:07

Thank you for those well wishes! There was a lot of food for thought today. We appreciate it.

Happy Thanksgiving from the three of us and everyone else at CT!!!!!

Roger Conrad

7:07

Bye everyone!

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