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5/14/20 Conrad's Utility Investor Live Chat
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richard
9:04
maybe you did not get my question on PBA. I read they are not covering the dividend from cash flow---how long can this go on
AvatarRoger Conrad
9:04
I did try to answer you. Basically, I think you're looking at this the wrong way. Companies that build long-term assets under 20-30 year contracts don't typically fund that whole thing with operating cash flow. Pembina's operating cash flow covers its dividend by roughly a 2-to-1 margin, or 73% if you include only fee generating assets. Yes, what's left over does not cover 100% of CAPEX. But that's borrowing or raising equity to cover CAPEX to fuel future growth--not borrowing or selling stock to cover the dividend.
David Foti
9:07
Roger, I don't know if you answered this already, but I put in a question about the risk of pending Democratic legislation in the House that would bar utilities from shutting off service for non-payment.  This seems like it would be disastrous for many of the stocks recommended.
AvatarRoger Conrad
9:07
Yes I did answer you. And what I said was this is not a big deal--mainly because utilities are already not cutting customers off for non-payment, so long as COVID-19 fallout continues. They're also going to be compensated in at least most states for any shortfall they suffer for not cutting people off.
Bill
9:08
Hi Roger. I think my questions were lost; !. I. EPD still solid, & the dividend safe ?   2nd. Doesn't DUKE have a coal ash problem..if so can it damage the company ? Thanks, I appreciate your time.
AvatarRoger Conrad
9:08
Bill, they weren't lost and I did answer them in this chat. It's just that I'm the only one here answering the questions and it takes a while to give a useful answer.
Alex M.
9:10
With a payout ratio in the mid-80s (based on consensus 2021 earnings), do you have any concern about Dominion's (D) ability to cover its dividend if it hits any bumps in the road?  Thanks.
AvatarRoger Conrad
9:10
None at this point.  Their revenue is almost entirely regulated or long-term contracted. And as we saw with Q1 results, it's not feeling much impact from COVID-19 fallout from any of its operations. See the Conservative Focus in this month's issue of CUI for more analysis.
Kevin C
9:13
Hi Roger, Back in the Cap Times days, you were thinking that MIN, NCA, and VGM were solid bond CEFs. Any thoughts these days. Thanks!
AvatarRoger Conrad
9:13
To tell the truth I haven't looked at those for a while, though they would be a good topic for Deep Dive Investing--the successor advisory to Capitalist Times. My feeling is you really want to try to avoid any credit risk you can in the bond market--with the narrow exception perhaps of short term debt of sub-investment grade essential services companies. And that has me recommending big diversified funds like VWITX over muni bond CEFs. Probably an area to look at more closely though, thanks.
Garry
9:14
Are ABB, ABBV, and BHP still buys under prices indicated in 05/04/2020 CUI-Plus portfolio?
AvatarRoger Conrad
9:14
I'll have an update as I said in the next few days. But that remains the advice now.
Jimmy
9:18
Utility companies seem to write off steam or nuclear plants and failed pipeline projects without any seeming hit to their finances although many millions of dollars of prior book value are lost.  How does this work without major hits to share prices?
AvatarRoger Conrad
9:18
Some certainly have taken big hits from writeoffs--the former SCANA for example walked away from the unfinished Summer nuclear plant a couple of years ago and might well have gone bankrupt had it not been acquired by Dominion Energy. I don't know of many pipeline projects gone bad at this point. But the big reason you probably don't see such big hits despite big numbers is these companies are large and financially strong enough to shake it off. What looks like a huge number really isn't for them in other words.

Southern Company, for example, wrote off several billions of dollars on the carbon capture project at the Kemper plant in Mississippi. But it was large enough to do so even while raising its dividend. And enough other projects went well enough to generate returns to compensate.

The larger and stronger you are, the harder the hit you can take and brush it off.
BlueJoseph
9:19
I just wanted to thank you for doing this day long chat. I very much appreciate it.
AvatarRoger Conrad
9:19
Thanks for tuning in. It has been a long one but I have gotten a lot out of it.
jim
9:23
Hey Roger - While we're pouring on the kudos, appreciation and praise, I want to say Thanks for staying consistent,  focused and reasonable while providing good  guidance.  Not every recommendation is a winner, but Mark Hulbert continues to rank you high in his evaluations.    I appreciate you sticking to what you do and doing it well.  Not being like many "advisors" with limited track records who blow their own horns and promote unrealistic claims.   Your results and confidence come across clearly to your customers.  Please keep doing what  you're doing without trying to grow and acquire for the sake of growth.
AvatarRoger Conrad
9:23
Thanks Jim. I will do my best to live up to that. After all of these years, it's still a labor of love, even if I don't always get it right.

That's also nice to hear about Mark Hulbert. He's truly been the investment advisory business' honest broker as long as I've been part of it.
AvatarRoger Conrad
9:25
Well, we've come to the end of the queue, as well as the questions we received prior to the chat. Once again, let me express my appreciation for your participation and especially for joining us at Conrad's Utility Investor.
Robert
9:27
Roger: Robert here. I have been a long-time subscriber. Thanks for your great work! I have a question on the mechanics of buying PG&E. Will the shares currently trading be cancelled? Would it be more prudent to buy the shares after they emerge from Chapter 11 in June
AvatarRoger Conrad
9:27
Hey Robert. I did answer your question just a moment ago. Bottom line is the big date is tomorrow when the votes are in for the restructuring. Approval looks priced in while a surprise rejection would probably send PG&E shares plummeting. But assuming the deal is approved, it will make no difference whether you buy before or after--at least not one that has to do with what shares you own.
AvatarRoger Conrad
9:29
OK. I'm going to sign off now. One last note, given the late hour it may be tomorrow morning before we sent the link to the transcript. Stay well everyone and I'll look forward to chatting with you next time!
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