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3/26/25 Capitalist Times Live Chat

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Roger Conrad

4:47

Hi Pesi. I answered a question on these two stocks a bit earlier in the chat and don't have a lot to add. I generally prefer common stocks to preferred stocks, since common dividends can be raised and preferreds' fixed rates means their prices are affected by volatility in interest rates.

That said, I've warned investors that BCE management appears to be at least entertaining a dividend "re-set" possibly later this year to a lower rate. i think the company has a quite solid franchise and a plan to aggressively reduce debt will likely help the stock. But if your desire is a constant dividend, preferreds are probably the safer option for both stocks.

Sal P

4:48

Afternoon Gentlemen Thanks for the chat as usual , Wondering if we know anything about PBF . Some how i must purchased this by mistake , I can not find it anywhere in our portfolio . Probably should have been PBA . Thanks

Elliott Gue

4:48

PBF is a refiner with operations focused on the West Coast (CAlif.) Refining margins have been terrible since last spring and that's hit the whole group -- our favorite in EIA is VLO and that's held up better than most but it's still down from last year this time. My view is that the selling pressure in the refiners is way overdone and, longer term, California doesn't have enough refining capacity to meet demand, which should mean refiners there (PBF) will enjoy solid margins.

John P

4:55

Good afternoon Roger and Eliot, thank you for giving us such good recommendations from all your services. My portfolio actually went up not down like the indexes. My question is with the current strength in natural gas which MLP's stand to benefit the most? How would that affect their dividends? Thank you. JP

Roger Conrad

4:55

Hi John. Blackstone Minerals LP is a royalty company that pays a dividend essentially linked to natural gas prices. But as far as midstream companies, the growth in infrastructure is pretty much in natural gas. And gas is the focus of most of the midstream stocks in the Model Portfolio of Energy and Income Advisor. That includes especially Energy Transfer LP, Enterprise Products Partners, MPLX LP, Pembina and TC Energy.

The equation for midstream dividends is the more investment they make, the faster they can grow free cash flow and the more they can pay out in dividends. There's no build it and they will come mentality as at the top of last cycle. Projects are almost fully contracted with costs locked in before the FID is made. So we view new investments in pipelines connecting power plants, industrial plants, LNG exports etc as bullish for the sector.

Elliott Gue

5:24

Thank you for the kind words about the services! Most MLPs won't benefit directly from higher natural gas prices. However, provided higher natural gas prices reflect rising demand for LNG exports and domestic consumption, this should continue to feed through into more volumes moving through MLPs systems and that benefits these stocks. Several of the MLPs in the model portfolio including EPD, ET, and MPLX will benefit. For more direct exposure to gas prices, our favorite names are EXE and EQT. Interestingly, the latter bought its former midstream subsidiary last year, highlighting the importance of having access to midstream assets when producing natural gas.

Arthur

5:01

Hi Gentlemen, I have some funds I’d like to deploy in the MLP sector. I already own most of your recommendations do have few that you are favoring at the moment? I’d like to add or buy fresh. ET and then EPD are my by far my largest positions. the rest are all about 1/4 each of my ET holding.

Roger Conrad

5:01

Hi Arthur. Yeah the ranks of our favored midstream companies really hasn't changed that much the past several years. That's basically what we consider "midstreams that matter"--which continue to expand their market share with acquisitions of smaller companies and therefore extend advantages of scale. And we've generally not been tempted to go back into smaller midstream companies--many of which still seem to be struggling to pay current dividends, preserve balance sheet strength and make meaningful investments to drive future growth.

Potential additions to complement large holdings of ET and EPD would be Canadians Pembina (PBA), South Bow (SOBO) and TC Energy. All are also Model Portfolio companies. Other than that, HESM, KMI, MPLX and PAGP are all solid holdings, provided you buy below our highest recommended entry point. Outside the portfolio, Enbridge is probably the most attractive.

Guest

5:09

Hi Roger: I have been following 2 REITS not included in the REIT Sheet: MAC and PARK. One of the funds operated by Baron Capital out of NY has positions in them. I do NOT like purchasing anything without your sage advice. Any thoughts about them? Or if they meet your criteria, might they ever merit inclusion with the other 80+ in your REIT summary? Thank you from all of us subscribers who rely upon you and Elliott to guide us through these stressful financial times!!!! Best, Barry

Roger Conrad

5:09

Hi Barry. Thank you for those kind words. I will put MAC on the list for potential future coverage in the REIT Sheet.

Macerich hasn't increased its distribution since December 2022. That makes me a little uneasy, since all of the retail REITs I currently recommend have increased payouts by at least a low single digit percentage rate consistently. Leasing does seem to be consistently strong and there's a strong development pipeline. But occupancy of 95.8% is a bit on the low side compared to other retail REITs like Kimco and NNN.

Are you talking about Park REIT the Bulgarian REIT? There's no dividend, though it's at 1.1X book value. But I generally stick to REITs in the US and Canada, with some European properties.

Bob S

5:11

What are the implications of XIFR issuing $1.75B notes in the 8 3/8%-8 5/8% range? Thanks.

Roger Conrad

5:11

Hi Bob. I answered this question at length a bit earlier in the chat. The short answer is this could indicate a faster than expected recovery--since the plan announced in January was based on not accessing capital markets at all. But I want to see the update next month--which should be out around the time NextEra Energy releases earnings (April 23).

Susan P

5:19

Hi guys, I have been delayed joining you today and apologize if my queries repeat prior points. Question for Elliot re the Smart Bond portfolio: When considering preferreds, do you pick ETFs that emphasize fixed/float securities vs fixed and do you "prefer" actively managed ETFs vs passive one that track indices? Question for Roger re Kraft Heinz: the dividend has remained the same since 2019 slicing that followed relatively consistent increases 2013-2018. Do you see the company returning to growing dividend approach? Lastly, I wanted to put a plug in for Roger's Discord availability for fellow followers wanting to ask questions other than this chat. As always, thank you both for the exceptional services.

Roger Conrad

5:19

Hi Susan. I see Elliott answered the piece of your question regarding Smart Bonds a bit earlier in the chat.

As for my part of the question: My expectation for Kraft Heinz since we added it to the CUI Plus portfolio has been that they would return to a policy of regular annual dividend growth once debt had been reduced enough to boost credit ratings to firmly investment grade. That has been achieved. But management has instead applied spare cash to share buybacks. The impact has been to offset inflation's negative influence on costs and sales--as customers reduce purchases to adjust to higher pricing.

This company is still generating pretty solid free cash flow. And given how cheap the stock is, I'm OK with holding it until conditions improve enough so they're comfortable raising dividends again. I also think there's been some concern about Trump Administration policies regarding processed food--KHC's specialty. And my patience with this stock isn't limitless. But I'm staying for now.

Roger Conrad

5:20

Susan, thanks for mentioning Discord. It's currently just for customers who come on through Substack and my Dividends Premium service--which is a combined CUI Plus and REIT Sheet. But we do plan to open it to paying Capitalist Times customers.

5:21

I've enjoyed corresponding with you there. And I hope more CT readers will join us when we do open it up.

Frank

5:25

Given the thesis that no utility has failed to recover from bad events, what is your prognosis on HE as it seems to hold pretty well in the $10 range. Given history of other recoveries, timeline for possible dividend.

Roger Conrad

5:25

Hi Frank. Yes, I believe Hawaiian Electric is well on its way to recovering financially from the devastating wildfires. There's still the matter of coming up with the $1.9 bil it owns as part of the damage settlement. But the case now appears settled. And the company has raised a big chunk of what it needs with a stock offering and the pending sale of 90% of its banking unit. My guess is we're still 2-3 years off from restoring dividends. But this company has support of the state of Hawaii for its recovery clearly--as its health is key to replacing the extremely expensive oil-fired power the state currently relies on, as well as any hope of renewable energy being anywhere close to 100% of the islands' power generation. It's a matter of time.

Arthur

5:26

Apologies if this a repeat as I can’t tell if my question went through. Aside from ET & EPD (which I already have) what are some MLPs you are currently favoring for the long-term?

Roger Conrad

5:26

Hi Arthur. No worries. Your question did go through and I answered it earlier in the chat with some suggestions. Mainly the other midstreams in the Model Portfolio, with ENB a possibility from outside.

Guest

5:29

Hi Roger: Any more news from the board at the company formerly known as NEP? Any new thoughts from you regarding its prospects or your intention to hold/sell? Thanks. Barry

Roger Conrad

5:29

Hi Barry. I don't really have any new insight on the board of XPLR/NEP, other than it's basically the people who run NextEra Energy, the primary shareholder. XPLR will be run for the benefit of NEE is the bottom line. At 30% of book value and given the very high quality nature of the assets and recent successful bond sale, I feel comfortable holding at least through Q1 results and the guidance update next month. i think it's a potential triple but only very patient and risk tolerant investors who don't need a dividend should play for that.

Jeff B

5:33

Roger, what is your opinion of NRG. I don't see it covered in CUI

Roger Conrad

5:33

Hi Jeff. It is covered in the Utility Report Card. I've been rating it a sell at a price of 95 or higher--basically this is a solid company that's executing on its growth strategy and is well positioned to capitalize on rapidly rising demand for electricity the next few years, especially with natural gas generation and its home services unit. But the stock was caught up in the buying momentum that took up the nuclear stocks like VST and CEG. And with the stock this high priced, my thought has been that investors should harvest gains.

Roger Conrad

5:36

By the way, renovations for the Utility Report Card and in fact the entire Conrad's Utility Investor website are nearly complete. But for the time being, we'll be sending you a link to the pdf of the updated Report Card.

5:38

The information in the current table on the site is updated as of the March issue publication date. But most of the columns still reflect previous versions, which is due to shortcomings of the old website infrastructure.

5:40

Reading across from the left, the correct column heads are: Security, Rating, Quality Grade, Price, Yield, Dream Buy Price, Profit Taking Price, Comment, Payout Ratio, Debt/Capital, Ex-Dividend Date and Industry. But it will probably be easier just to consult the PDF.

Fred

5:45

With Williams (WMB) running up to where it pays a little above 3%, I exited at $60 with a nice profit. I already have BSM, where can I get a decent yield on gas related stocks. EXE for instance only yields 2% so that won't do it

Roger Conrad

5:45

Hi Fred. Williams and the C-Corp midstream companies (ONEOK, Kinder Morgan etc) did catch some momentum buying earlier this year. And while they've given some of that back, the MLP midstreams are in our view a better value right now. If you already have Blackstone, you're perhaps not averse to receiving K-1s rather than 1099s at tax time--and certainly now is the season for that! If that's the case, Energy Transfer is a value right now as is Plains. There are also the Canadians Pembina, TC Energy and South Bow. These have 15% withholding tax you can recover as a credit on your US taxes.

Roger Conrad

5:46

Just got word from Sherry that John A's question way back in that chat was about SmartCentres REIT, which is basically Wal-Mart's landlord in Canada. t

5:50

They're pretty much doing everything right now as a business as far as I can see. Development plans are proceeding on time and budget and there's plenty of backlog for more Wal-Mart and Costco anchored projects. FFO was up nearly 10% and the payout ratio continues to come down, meaning dividend increases are no longer so far off. The weakness in the Canadian dollar has hurt returns in all of these stocks--dollar for dollar. So that's held back gains this year (4.44% as of today's close). But that's ahead of the SPDR REIT ETF and further ahead of the S&P 500. For more on the earnings, see the comments of this month's REIT Sheet Rater.

5:52

Well that looks like all we have in the queue as well as from emails we received before the chat.

Elliott Gue

5:52

Good evening everyone. Look forward to the chat again next month.

Roger Conrad

5:54

If for some reason we didn't answer your question to your satisfaction, please drop us a line at service@capitalisttimes.com and we'll reply as soon as we're able, Remember we'll be emailing you a link to the transcript of the complete Q&A tomorrow morning. And as always, we'll be posting it on our websites as well.

RBB

5:55

Thank you

Roger Conrad

5:55

Thank you!

Roger Conrad

5:55

Thanks again everyone. Echoing Elliott, we appreciate your business and participation today. As always, you've given us food for thought. Hope everyone is having a happy spring.

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