JotCast | 2/11/20 Conrad's Utility Investor Live Chat

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2/11/20 Conrad's Utility Investor Live Chat

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Roger Conrad

8:57

You're welcome Jim. I just answered the identical question from "Guest", was that yours? In any case, I hope that was what you were looking for.

Richard

9:02

I keep reading on SA that CDUAF has very high debt levels which concerns me. Anything to worry about here?

Roger Conrad

9:02

Hi Richard. Seeking Alpha definitely gives voice to a lot of people. But Canadian Utilities really does not have a debt problem, which should be clear from their high credit ratings, low average weighted debt coupon rate of 4.34% and long average weighted maturity of 18.66 years. Like all utilities, it invests heavily in infrastructure with long-term lives, which usually means they finance their CAPEX with some debt. But this company actually generated an estimated CAD650 mil in free cash flow last year, which covered their dividend better than 1.5 times. There is potential regulatory risk here, with the company operating in economically weak Alberta. But this is a pretty high quality company.

9:04

Roger, what happened to PAGP yesterday a 7 % drop

Roger Conrad

9:04

Possibly a negative reaction to Q4 results--I think people were looking for b better volume numbers than they posted. But as I said answering an earlier question, the bottom line was free cash flow that covered the dividend with room to cut debt--and more of the same in store for 2021. Our advice hasn't changed from Buy below 10 for aggressive investors who don't already own the stock.

Jimmy

9:06

For those who did not sell their China Mobile before it was delisted, what are their ownership rights at this point?

Roger Conrad

9:06

I'm not certain. The shares are still trading in Hong Kong and the delisted NYSE shares are worth 5 HK shares. But I think you're going to have to talk to a broker who's knowledgeable to get this done. I'm sorry you were unable to sell. I've never heard of the US government doing this to people but the former president did it and here we are.

jim

9:08

roger - i submitted this at the beginning of the chat - and have not seen it answered. sorry to be pesky, but previous questions never got into the stack.........................................................Roger, I have two questions.

Can you give me your recommended buy point for MPLX, and how you think the outlook of MPLX compares to EPD and other premier midstreams.

I own PAA, ET, EPD, MPLX, WMB, and am down 55% on PAA and 50% on ET. I am concerned that you rate both stocks as a “C” grade. What should my strategy be – hold in hopes of coming back – or sell and run. I have always tried to sit still in quicksand, and not wiggle. I hate to bail out, and forgo the 8-9% return. The question is safety. Are ET and PAA over the hump of bad news, and worthy of holding for the yield?

Roger Conrad

9:08

Hi Jim. As you might notice reading the transcript, it's taking me a while today to get to all of these questions. That's good! But the answers are coming out later than I'd hoped. I did answer your question--basically this is not the time to sell any of these stocks.

RBB

9:12

Given AY has a buy recommendation below $33 and that current price is $40.50, is there a reasonable expectation as to what AY's path (expansion of business opportunities) may be for, say, the next 3 years? On the other hand, could you not say that AY is worth holding for now until there is another alternative equity to consider going long ? . . . . Hope all is well with you, Elliott and Sherry.

Roger Conrad

9:12

Thank you! I'll pass along your well wishes. Basically, Atlantica did trade above my "consider taking profits" price for a short time but is now back in that no man's land, between the most I'd recommend paying for it and where taking money off the table makes sense. It's there because people have identified Atlantica as a company leveraged to renewable energy growth and have bid it up. My next move here depends largely on what I see in Q4 earnings and guidance at the end of this month. If I like what I see at this well run outfit, I may raise my buy price. In any case, I do not see much risk to management being able to add enough assets to grow the dividend 5-8% a year--which makes it a hold for now.

Tom Lewis

9:14

Thanks very much for the Chats. I have been a follower for more than 20 years, and currently subscribe to CUI and CUI+. The utility WEC had quite a run last year, but in the last couple months has taken a 20+% hit. Your take on this, and what do you see happening over next few years?

Roger Conrad

9:14

Hi Tom. As I answered in an earlier question on WEC, this one was out of reach for a long time. Now it's back at a good buy price and earnings multiple where mid-single digit earnings and dividend growth annually should produce an average annual return of at least 10%--which is basically the minimum for a company with an A Quality Grade in my system. Same company here as when it traded well north of $100--just a better entry point.

Alex M.

9:17

Hi Roger. Now that the dividend cut at ET has happened, do you consider the dividend safe going forward? Is there still risk due to the debt load? Thank you.

Roger Conrad

9:17

Yes. There have now been two payments of Energy Transfer's dividend at the reduced rate. And the company is producing the forecast excess cash flow to cut debt at the rate management wanted. I do think what they're paying now is secure, even in the environment we're in. There's still some risk here, for one thing the court case regarding the Dakota Access Pipeline. That's why it rates just a C under the Quality Grade system. But I think the current price reflects the risks. And like I said, the company is producing enough excess cash after dividends to deleverage pretty quickly, even with revenue constrained by the weak macro environment for energy.

For an update post earnings (Feb 17), check in with us at the EIA live chat on Feb 25.

Alex M.

9:18

I know you recently recommended swapping ATO for SJI, but I am continuing to hold a small-ish position in SJI. Do you think there is any risk to SJI's current dividend? Thanks.

Roger Conrad

9:18

No, I think the dividend should be pretty well covered at South Jersey Industries this year. I just thought Atmos was a better pick for this year.

Richard

9:20

In regard to 5G, do you think the growth of AMT as a reit is another way besides the major players to play the trend. Same question re DLR and data reits and relentless rise in data? Are they buyable now for retired folk

Roger Conrad

9:20

Yes, American Tower is a good buy at the right price. That would be at 220 or lower. I like the recent expansion in the US to balance the portfolio and the Telxius purchase from Telefonica looks like an exceptional deal. But I do think this is a favorite that's proven it can be quite overpriced at times.

Guest

9:21

Can you discuss your opinion on Canadian Utilities - I thing you do have it as a buy.

Roger Conrad

9:21

It's conservatively run, has a good balance sheet and is relatively inexpensive because of the economic weakness in Alberta. We'll see earnings on Feb 25. But the dividend increase announced last month is a vote of confidence. And as I answered in a previous question, the debt is not a concern.

Guest

9:22

Canadian Utilities = CDUAF

Roger Conrad

9:22

Please see my answer to the same question just now.

Dennis Z

9:23

What are your thoughts on OGE? Is there any specific reason it's not in any of the portfolios?

Roger Conrad

9:23

Not really. I just like other utilities more. I do track it in the Utility Report Card as a buy. The big issue as I've discussed earlier in the chat at length is the pending sale of Enable Midstream, which OGE is half GP of and owns a chunk of the common shares as well. Shedding that should result in a higher valuation for the company as well as faster dividend growth. Q4 earnings and guidance are Feb 25

John

9:25

Hi Roger, thank you for all of your great advice. I have set up a portfolio that will be able to take advantage of fossil fuels and renewables. I have big gains on HASI, BEP, AV, NEP and AQN. You mentioned Avangid, Orsted and Enel during your latest issue. In your opinion which of the three would benefit the most from renewables in the future. Thanks.

Roger Conrad

9:25

Orsted is most leveraged to renewables as a pure developer. Enel is probably the most conservative because it's by far the largest. Avangrid is a the purest play on offshore wind in the US. Bottom line is all three benefit greatly, which you pick should suit your own investment style.

rd1goff@aol.com

9:25

for parking capital what is the Vanguard muni fund ticker symbol please ???

Roger Conrad

9:25

VWITX

Don

9:28

China Mobile seemed to be very cheap prior to delisting. What are investors to do with their holdings if they still had it at time of delisting.

Roger Conrad

9:28

Hi Don. I've answered this question at length earlier in the chat. Sorry it took so long to get there. Bottom line is they're trying to get re-listed on the NYSE. The local shares (5 equals 1 ADR) are still trading in Hong Kong. But I really don't know how possible it is to break up the ADR to trade in Hong Kong. That's something to discuss with your broker. In any case, the company itself is doing very well with its 5G rollout and the stock is up since the delisting, so holding on isn't a bad option either. I will continue to track it in Utility Report Card as well.

Alex M.

9:32

Hi Roger. Thoughts on NWE? What's keeping it from earning an 'A' on your quality grade scale? Thanks.

Roger Conrad

9:32

Northwestern Corp is rated a buy up to 55. It misses an A Quality Grade on some regulatory issues in Montana. I haven't had a chance to look over earnings announced today in detail--will do that for the March issue. But in the meantime, they did make their guidance range for 2020 and affirmed their guidance for 2021, and raised their dividend 3.3%. That may be enough for me to raise the buy target again, though I'm not making a decision on that at this time.

Tom L

9:37

Hi Roger - As I move closer to retirement, I've been trying to balance owning individual stocks along with ETF's. Your thoughts on AMLP and/or ENFR?

Roger Conrad

9:37

Hi Tom. Just so you know where I'm coming from, I don't recommend people swap individual stocks for ETFs when it comes to utilities or even energy stocks. I think you're going to get much better results from buying individual stocks, especially if you use a service like Conrad's Utility Investor or Energy and Income Advisor.

That said, I think there are times where ETFs may make sense if you don't want to choose individual stocks there. And there are of course plenty of options, like XLI for industrial stocks or XLF for financials.

Of ENFR and AMLP, though I really do not have a preference. ENFR has Enbridge as the top holding, for AMLP it's MPLX. I like both stocks.

Cindy

9:38

Hi Roger,

Roger Conrad

9:38

Hi Cindy. Thanks for joining us today.

Cindy

9:39

Oops. Hit return too soon. I wondered about the symbol for NTT. When I look on my account I get NTTDF ($11,10)M NTDMF ($37.45) and NTDTY ($16.25). Is the first the one I want to buy since it is NTT ordinary shares?

Roger Conrad

9:39

The symbol for NTT American Depositary Receipts--which is what I recommend in the Aggressive Holdings--is NTTYY. It's equal to one of the home market (Tokyo) listed shares. The actual Tokyo symbol is a number, 9432.

Alex M.

9:41

The payout ratio for BCE seems to be topping 90%. Do you still think the stock is a good candidate for a conservative portfolio even with such an elevated payout ratio? Thank you.

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