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6/27/24 Capitalist Times Live Chat
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AvatarRoger Conrad
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Hello everyone and welcome to our Capitalist Times live webchat for June. As always, there is no audio. Just type in your questions and we'll get to them as soon as we can comprehensively and concisely.
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We will be sending you a link to a transcript of the complete Q&A, probably tomorrow morning since these things tend to last a while. Thanks again for joining us and for being a CT member.
Let's start with some answers to questions we receive by email prior to the chat.
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Q. Dear Folks, I would like to check in with you regarding your recommendation for OVV, which has dropped quite a bit recently. Are you still bullish on oil producers like OVV? Any thoughts on why oil/gas prices seem to be sleeping? If we are heading into an economic downtown, won't they slip a good deal more? Many thanx for your always sage counsel.--Jeffrey H.
 
A. Hi Jeffrey
 
Thank you for those kind words. We still like Ovintiv and the other natural gas-focused producers in our EIA Model Portfolio--Chesapeake Energy (NYSE: CHK), EQT Corp (NYSE: EQT)--despite their recent dip
, which we believe is mostly related to benchmark natural gas prices' inability to stay above $3 per million BTU this summer. We had been seeing upward momentum from the beginning of May. And it looks like some of that has cooled for the time being--with at least some of the money moving into midstream stocks. But that said, natural gas production has tightened as producers have reduced output in the face of lower prices. And underlying demand from electrification, retirement of coal and nuclear, LNG exports and powering artificial intelligence enabled data centers is extremely robust--as we highlight in the EIA issue that was posted today.
 
 
We plan to have our semi-annual oil and gas outlook out in the next couple weeks, which will highlight our views in more depth. But we see these pullbacks as opportunities to add to positions at a low cost. 
 
 
Q. Greetings Roger,
 
I trust your summer is off to a good start. A client sent me some information pertaining to the “micro-reactors” being developed by Rolls Royce. I wasn’t aware they were in this area or that they had nuclear exposure. Stock has gone 3X in last 12 months.
1.   Do you consider them a viable player n the SMR/alternative energy field?
2.   There are 20 SMR/SMR variable companies globally – is this idea too early and best to stick with VST, EXC/CES and SO for nuclear exposure, for now?
3.   Article in latest Barron’s on resurrection of wind energy. Given DJT’s likely win and comments about killing wind energy (fact or fiction???), do we still lean on NEP, NEE, CWEN and BEP for income now while we wait for possible recovery?
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1.    
Many thanks for your incredible work in all things utility, energy and related areas. Your CUI+ portfolio is an awesome concept for investors.
Regards--Frank L.
 
A. Hi Frank
 
I think pretty much everything you read about SMRs these days is speculative. There are technologies that sound very promising. But we've yet to see anyone take the leap and sign on the bottom line. And after the collapse of the NuScale Power Corp (NYSE: SMR) project in Utah, there appear to be even fewer willing to take the risk. I would say for SMRs to take off in the US, you're going to have to see a large utility win financial support from its state regulators along the lines of what Southern Company was able to do at the Vogtle site. The price tag would obviously be less, but so will the payoff in output so I would expect massive scrutiny of any project by the public--particularly given how cheap solar and natural gas are. Failing that, a big technology company could provide funding to a developer
developer like Brookfield Renewable--which owns half of Westinghouse. But my view is I want to see an actual project that's backed by real money before I'm going to invest in any of the companies now being hyped in the media. That includes Rolls Royce. And at this point, Vistra and Constellation are hardly bargains either, though both are great companies. Exelon does not have direct nuclear exposure, just T&D. 
 
I like Southern, though management has said it's in no hurry to launch on another Vogtle project. It's conceivable that Dominion Energy will revive the Summer nuclear project--now that Southern has proven the technology works and given South Carolina's massive electricity needs going forward even without new data centers. But again, new nuclear is just hype at this point. Operating nuclear is where the benefit is to earnings right now.
 
As for your third question, I do think the prospect of a DJT presidency is weighing on these stocks now. In fact, Dominion Energy executives were asked about a
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potential threat to the Coastal Virginia Offshore Wind project at a recent analyst event. As the Biden Administration has shown the oil and gas business, presidents do have extensive power to restrict permitting--drilling on federal lands and new LNG export facilities being two good examples. But attempts to shut down already permitted projects or worse operating facilities would be unprecedented and certainly impossible without years of legal action--as again the Biden Administration has found with oil and gas. It would also deliver a big economic hit not just to developing companies but to the areas served--basically triggering power shortages. That's also something the Biden Administration and several state governments including California have discovered trying to shut down coal, gas and nuclear power.
 
Overall my take here is (1) These stocks are pricing in not just a DJT victory but he as president being willing and able to push through actions that would be highly contested and damaging to the economy
and (2) Investing based on that kind of speculation is not likely to end well. 
 
There's certainly no guarantee Brookfield, Clearway, NextEra et al are going to keep growing at the same rate the next few years. And like every business they face risks. But in contrast to the great majority of earnings-less "green" stocks that were so hot just a few years ago, these companies have consistently proved they can make money. That's despite unprecedented tariffs and supply chain disruption for vital components like solar panels and batteries, a pandemic and more recently generation-high borrowing costs. And truth be told, these stocks actually did far better during the first Trump administration than they did under Biden--just as oil and gas stocks have been the best performing S&P 500 sector by a 2-1 margin since the last presidential election.
 
Bottom line: Don't get too wrapped up in energy politics here. Well managed and dominant companies will find a way to make money. And policies that try to restrict their
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investment will hit their rivals far worse, which at the end of the day will increase their dominance.
 
By the way, I plan to devote the feature article in the July Conrad’s Utility Investor to opportunities in nuclear energy. It’s scheduled to post Monday July 8.
 
 
Q. I've held MPLX, mostly since 2019 ... with your encouragement. Was a dog before launching relentless up-move in 4Q2020. Sold a bit in Apr, more today ... altogether about 25%. So, not only had great dividend income, now have substantial capital gain. Since financials continue strong, likely will continue holding the rest although highest since 2015 and RSI = 68. But, might ease out of 10-15% at a time for each $3-4 higher price if gets there.—Joe W.
 
A. Hi Joe
 
Glad to hear you've done well with MPLX. It's always been a strong midstream company. I think a lot of people were too worried about Marathon Petroleum trying to buy in the 36.29% of the company held by the public--and that did weigh on the stock for a number of years.
That might still happen. But the price would be high. And MPLX is steadily expanding cash flow and the dividend, which Marathon likes. 
 
I think the dividend is headed for another 10% bump later this year. But that said, MPLX has run a bit over our highest recommended entry point of 40--as the midstream sector has picked up some buying. And I'm not inclined to advise chasing it at the current price.
 
Hope this explains the current thinking.
 
 
Follow up Q: TY. I certainly won't be buying more here.
 
The tension is whether to hold some-all of what I still have, with the generous dividend yield (currently 8% and, as you indicate, maybe to grow); or cut bait and redeploy elsewhere.
 
My inclination is to hold what I have but scale-out as I indicated in earlier message.—Joe W.
 
A. We're not sellers as yet. In fact, we'd probably recommend buying more on a dip to the high 30s. This stock traded in the mid-80s at the top of the previous energy up-cycle (January 2015), so roughly twice the current level.
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. And the quarterly dividend at the time was 35.75 cents per share, versus the current 85 cents. MPLX did not cut during the energy bear market in the previous decade. It has the wherewithal to maintain at least upper single digit percentage dividend growth for the foreseeable future. And it's firmly investment grade (BBB/stable outlook from S&P). 
 
We think there's more in the tank eventually--but a little rich at this point.
 
 
Q. Gentlemen,
 
The webinar provided some excellent information, and I very much look forward to throughly reviewing this current issue of Smart Bonds. I did sign up for the lifetime subscription. I do have a suggestion: for a publication of this size it would help considerably if the pages were numbered and there was some kind of index or table of contents. 
 
Thanks--Warren S.
 
A. Hi Warren
 
Your suggestion is noted. Glad you liked the presentation and welcome to Smart Bonds!
By the way, to anyone else interested in test driving our new service--Smart Bonds—or checking out the presentation introducing the service and the opportunity—please give Sherry a call at 1-877-302-0749 anytime M-F from 9-5 ET.
 
 
Q. What are your current thoughts on CNQ? If one believes that oil will be increasing in price, then will the dividends paid by CNQ automatically increase? Similarly if one believes the price of oil will decrease, then the stock should not be purchased?

Since CNQ is basically a dividend stock due to the dividend policy of distributing all profits below a set amount, why is it not a better dividend investment than CHV or XOM?
 
Thanks--Ralph B.
 
A. Hi Ralph
 
We do track Canadian Natural Resources in our EIA Canada and Australia coverage universe, which you can find on the EIA site. The current advice is to buy at 38 or lower--which is post the 2-for-1 stock split this month. And for disclosure purposes I also own it.
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The company actually has a very steady dividend policy that they've been able to sustain in adverse market environments. But they're now about to get a big boost from the opening of Canada's Trans Mountain pipeline expansion--which will for the first time allow substantial Canadian oil exports to Asia. The company does have substantial exposure to the tar sands, which means there will be long term environmental challenges. But I think there's a lot of room for growth in the share price and dividends going forward.
 
Q. Roger, what is your current opinion on VET? 
 
Seems like they had a strong Q1 and are trading well below your buy under price. Thank you.—Rick P.
 
A. Hi Rick
 
I think Vermilion is on the right track with its production strategy, and from a financial standpoint it continues to be run very conservatively. That's pretty well reflected in the Q1 free cash flow of CAD1.49 per share, which enabled them to raise dividends 20% and buy back 2.4 mil shares of stock--after they cut net debt to
under CAD1 bil, and boosted CAPEX 23%. They also raised output by 3.7%--not a lot but enough with cost controls to overcome a -43% drop in realized selling prices for natural gas. 
 
I think the stock is still suffering from the decision to eliminate the dividend temporarily in 2020-21--as well as the relatively low yield (3%). But the worst is clearly behind Vermilion and I think the stock will easily be back in at least the 20s the next couple years.
 
Q. Dear Mr. Conrad,

I agree with you that this is a great time to get into bonds.  Do I understand correctly, however, that Smart Bonds will only cover bond ETFs? You will not recommend individual bonds to purchase? From what I understand,
bond ETFs, whether open-ended or closed-ended, have some peculiar investment characteristics that make them rather unlike bonds themselves. I'm just wondering why you chose to focus only on ETFs. Thanks very much.--Gerald P
 
 
A. Hi Gerald.
Thanks for your interest in our new service "Smart Bonds." I hope you were able to
listen to our presentation on the service this past week, which actually did spend a lot of time our reasons for using this strategy. If you haven't and would like to, please contact Sherry Roberts at 1-877-302-0749 anytime M-F, 9-5 ET and she'll be happy to send you the link.
 
In brief, our main reasons for using ETFs are (1)ETFs are much more liquid than individual bonds. The list of bonds I occasionally highlight in Conrad's Utility Investor, for example, basically trade on appointment and my standing advice has been to work with a broker to find the best possible equivalents. Using ETFs allows us to make precise recommendations. (2)There are now ETFs to track every corner of the bond market, including areas that are basically off limits otherwise to individual investors. (3)We don't intend to make frequent trades. But using ETFs does allow us to do so at minimal cost as they're far more liquid than individual bonds. And we can target entry and exit points as we do with individual stocks.
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I invite you to check out Smart Bonds for more. We'd be interested to know what you think.
 
Q. Hi Roger,
 
I hope this message find you well and you are staying cool.
 
I came across the attached opinion piece in today's Asbury Park [NJ] Press speaking to the high cost of wind power. Specifically, the piece refers to high power costs in Rhode Island which are substantially more than the national average and likely to go higher still.
 
I have the following questions.
1.   Do you think the present high energy costs in Rhode Island will result in PPL (I own) not being able to get future rate increases due to the affordability issues?
2.   Do you think this article foreshadows significantly higher energy costs in Virginia as D builds out their offshore windmills in the coming years?
3.   How do D’s windmills sustain the increasing demand of AI data centers on a 24/7 basis without building back up power sources?
4.   Is D precluded from including their windmill costs in South Carolina electric rates which I
1.   pay?
 
I am still angry over D selling off their midstream and gas distribution assets to go into to this windmill building business. In the interim people are flooding into SC where I live and there are no firm plans to increase the electrical power supply considering the failed nuclear plant other than the pie in the sky natural gas plant. As always I am grateful for your commentary. Kind regards,--Jim C.
 
A. Hi Jim
 
Thanks for sending the article. I know offshore wind development is somewhat controversial in New Jersey, though the state government appears committed to it. But the projects there are also in a far earlier stage of development than Dominion's Coastal Virginia Offshore Wind facility--which is already pouring monopile foundation and will have its own construction ship that's now 88% completed and on track to transit to offshore VA by late 2024/early 2025. The costs of the prospective NJ projects are highly speculative at this point. For Dominion, they're now 93% locked in
with the rest heavily reserved--and the $72/MWH projected cost is still well below the statutory amount approved by Virginia regulators. 
 
It's still of course possible that the Dominion project will come off the rails. But I think the risk of that happening continues to drop. And we do know that these machines work because so many are in operation already around the world--including the 800 MW Vineyard facility off the Massachusetts coast. 
 
As for costs in general, once offshore wind facilities are in operation, there's maintenance expense but no fuel costs--which are both the largest line item expense on utility income statements and the biggest expense passed through into customer bills. So provided these facilities run well, there's a good argument to be made that they'll help keep rates lower--especially if natural gas prices return to $4 per million BTU or more as we think likely in coming years. The principal cost--as is the case with nuclear, solar etc--is for siting, permitting and building and is
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basically up front. In Dominion's case, that's being recovered in utility rates. In the case of developers elsewhere--Avangrid with Vineyard for example--output is sold into the grid at a contracted rate, which was negotiated with state regulators. 
 
Answering your specific questions: (1) I don't think offshore wind projects built by developers will increase rates to the extent Rhode Island regulators won't allow PPL to recover needed grid investment. Connecticut might but PPL has no exposure in that state. (2) I don't think the points in the article apply very well to CVOW. and in any case the costs that the utility can pass on in rates is already fixed. (3) Dominion is going to literally need "all of the above" when it comes to energy sources to meet new demand. The important thing is Virginia is supportive of both data center growth and the utility's investment to meet it, so the spending should support the target 5-7% annual earnings growth starting next year. (4) CVOW is a Virginia project and
so the cost will be borne entirely by Virginia ratepayers. South Carolina is going to need a lot more generating capacity as well, however. 
 
One possibility is they restart the Summer nuclear project--which I think would require a great deal more federal support. But it's more likely we're going to see a combination of solar and natural gas mainly. My information is that offshore wind isn't really a good fit for South Carolina, though Dominion by owning its own construction ship would be well placed to build it. 
 
As for selling the natural gas transmission business, from a "Monday morning quarterback" vantage point, it looks pretty clear Dominion could have received a better price for the assets by waiting a couple years. On the other hand, they did look pretty smart selling the gas production arm at a high point some years earlier. And they appear to have done the same thing
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selling the natural gas distribution business to Enbridge Inc this year.
 
Q.  Roger,
A few comments on Altria and CVS:
Altria: I quit smoking long ago, so I was surprised to learn from a current smoker that cigarettes, in Pennsylvania at least, are $12.00 a pack, though less in other states. I have a lot of Altria stock, for the dividends, and also have significant capital gains over the years. I agree that the dividend should be safe for the foreseeable future. However, common sense tells me that the company’s ability to continue raising prices due to “inelastic demand” is probably reaching an endpoint and should be factored into any forecasting.
 
CVS: No one I know shops there. Prices for anything from generic aspirin to blood pressure monitors are on average 40% more than any nearby grocery store, Walmart or Target. If you use GoodRX for prescriptions, you can get the discount elsewhere but not at CVS. Their business model uses dollar rewards and 40% off coupons, but after applying both, the cost is only
slightly less than the Giant next door. Again, something to factor in.
 
Thanks.--Ed B
 
A. Hi Ed
I remember working as a cashier in the early 80s--one of my first jobs and definitely one of the most taxing--and collecting $1 for a pack of cigarettes. That included the tax. I've never been a habitual smoker. I've seen too many people laid waste by tobacco addiction. I don't doubt Altria faces eventual long term survival threats. And as I've said in CUI Plus on multiple occasions, no one should view this as a growth stock. But it does still have multiple levers to pull to keep earnings and dividends growing--cutting costs, selling investments, some diversification here and there. And Marlboro is still by far the world's premier cigarette brand. So while I don't consider it a forever stock, I will continue to keep it in the portfolio so long as I think it's capable of generating a solid return--which it does just by paying the current dividend. And it's hard to argue the stock is pricing in anything other than
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steady to declining earnings at 8.7X expected next 12 months earnings.
 
As for CVS, I will say its franchise is apparently a lot more popular where I live. But the play here is how well the company can leverage its three parts--pharmacy, health care services and insurance--to build an integrated franchise that's the clear number one for Medicare. There have clearly been some stumbles, especially on the cost front as they've expanded. But there are also signs of solid progress, such as memberships. And again, you're not paying much to play here with the stock at 8.6X next 12 months earnings. I don't consider this a forever stock either. But if they can find even some measure of success, the stock is going to be on much higher ground the next few years.
 
Q. Hi Roger:
1.   When do you believe that MPLX will announce their close to 10% dividend increase?
2.   And when they do, should the price of the stock not go up in response to the dividend increase from $3.40 per share?
3.   Is it not a good idea to
1.   purchase some more of the stock in contemplation of the dividend increase announcement? Or has that already been factored into the current price?
Thanks Roger always for your sage advice.--Barry J.
 
A. Hi Barry
 
Following the practice of recent years, MPLX will announce its next dividend increase in late October. And I would expect to see an annualized rate somewhere around $3.70 to $3.80. Last year there was relatively little movement either up or down in the share price following the announcement of a boost. Rather, most of the volatility in the share price over the past year has been in response to market-related developments.
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Share prices do tend to follow dividends higher over time. And while sometimes a big dividend increase will push a stock up meaningfully. But most of the time, those increases will show up over the longer-term rather than near-term. 
 
 
Q. Hi Roger.

It appears after NEE’s recent investor presentation there appears to be a much greater scepticism amongst the analyst community regarding NEP’s ability to maintain their current dividend as well as future growth drop downs. Are you still optimistic regarding NEP’s recovery?

Thank you for your insight from a long-time subscriber.--Ron K
 
A. Hi Ron
 
I thought the extreme negative reaction to NextEra's earnings guidance call was a pretty good example of group think generating stock price momentum. And I believe the volatility is basically meaningless for anyone with a longer-term time horizon. The supposedly "disappointing" guidance for 2027 was a 14% earnings increase at the mid-point from the mid-point of 2026 projections. That's an earnings boost basically
twice the 6-8% annualized earnings growth rate management target--not really my definition of bad news. The reaction to the sale of equity units today is basically more of the same and I think a good buying opportunity for anyone light on NEE.
 
As you might have seen, NextEra Energy Partners today announced its reaffirming growth rate expectations. The presentation they filed with the SEC today pretty much lays out the same themes and numbers--including 5-8% target annual dividend growth through 2026 based on incremental cash flows from repowering several onshore wind facilities. I've read Barclay's report and I would agree that on a standalone basis NEP would have a capital raise challenge when it essentially must refinance maturing obligations starting in 2027--mainly the convertible equity financing. NEP, however, is not a standalone company but a financing vehicle for its parent and major shareholder NextEra Energy, which has massive investment opportunities and therefore funding needs in the long-term.
So long as NEE is patient with NEP--as it was in a similar down period from 2015-16--NEP will be able to meet its 2027-30 obligations without blowing itself up (with a deep dividend cut) and thereby eliminating its usefulness as a funding vehicle. 
 
It's certainly possible NEE could decide keeping NEP in the game isn't worth it at some point. But let's remember that NEP at $2.6 bil market cap is a drop in the bucket at NEE, which has a $144 bil market cap. It seems more likely to me that if they wanted to wind up NEP they would just buy in what they don't already own and get the cash flow benefit from the contracted portfolio, rather than take the reputational hit.
 
I hold NEP in the Aggressive Holdings because there are these unknowns. And as you know, I'm not a fan of doubling down on any one stock. But I think the recovery track for NEP is still pretty wide open. And while there are no guarantees, if NEE is able to use it as a funding vehicle again it will
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be two to three times its current price.
 
Q. Hi Roger,
 
I listened to the webinar on the Smart Bond strategy. I have been investing in bonds for over 40 years. Your concept is interesting, but I have to say I have lost money in every bond fund I have ever invested in.  I much prefer buying individual bonds.
 
Will you be publishing the results of the portfolio on an annual basis? I would like to see some sort of track record before I buy in. The cost of the service is not the issue, its the performance of the portfolio. 
 
Hard to believe I started with you almost 20 years ago in utilities and MLP's.
 
Best regards--Jeff B.
 
A. Hi Jeff
 
Yes. We'll be tracking returns on a regular basis and I'll be happy to share the results as we get them. I will also continue with the list of individual utility and essential service company bonds in CUI.
 
 
Q. Roger 
I know there was much talk about converting the Algonquin Preferred (AQNU)- However I missed the deadline - What do you suggest I do with aqnu -
Hold or sell. That for all your efforts over the years.—Marty W
 
A. Hi Marty. Algonquin has executed the exchange at a ratio of 3.3439 AQN per AQNU. You should not have had to do anything to receive the exchange. And if the AQN common shares as well as the final dividend of 96.875 cents per share are not in your account, please contact your broker and refer them to their SEC filing of June 17, 2024 the “25-NSE 2024.” I also published an Alert on June 18 Algonquin’s 7.75% Preferred Stock Matures: We’re Keeping the Common that highlighted details of the exchange and our rationale for sticking with Algonquin common now.
 
 
Q. Dear Roger, In your most recent utilities issue, you listed several small companies with good internals that seem to be possible takeover targets. I am curious about NWN -- which appears to have gotten beaten up worse than all the others. It's just about at its 52-week low. Might be called a "dream price?" Or are there monsters lurking? Do you think its punishment has been
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merited? Do see much catalyst for its price appreciation apart from a Fed pivot? Is this simply a collect-the-dividend and wait a couple of years for something good to happen? I assume the dividend is safe, yes? Many thanx for your advice, Jeffrey H
 
A. Hi Jeffrey
 
Northwestern Natural Holding's dividend growth rate has been at a low single digit percentage the last several years. So, it's not too surprising the stock has traded at a lower valuations (higher yield 5.5%, lower P/E of 13.1 times expected next 12 months earnings) than other utilities with demonstrated faster growth rates. There may also be some discount for the company's location in western states due to perceived wildfire risk. And Oregon is a state where some localities have considered banning new natural gas hookups.
 
That said, I think the company's expansion into the water utility business and growth of RNG (renewable natural gas) output are strong positives. There's a growing opportunity for the utility to reduce rate lag in its ongoing
case, now that extraordinary fuel costs resulting from 2021 Winter Storm Uri are behind it. And with earnings on target to meet growth guidance of 4-6% annually, dividend growth should accelerate in coming years.
 
I think the dividend is safe and the downside is limited. As for upside, there are multiple catalysts (takeover, reduced rate lag, growth of water business) that should reward the patient, in addition to an eventual Fed pivot. 
 
Q. I wanted to see if questions prior to the chat were possible? I don't want to overstep and ask more than the normal process for questions. So,
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I will resend the question closer to the chat if that's the appropriate process.
FYI, the company is the newly public company Vitesse Energy, whose ticker is VTS, that went public in 2023 after roughly a decade of conducting their business privately. Insiders own 20% of this small cap, which suggests an aligned management. Its short track record and payout ratio are concerns but, its use of data made me wonder if it could be an AI beneficiary. In brief, I wondered if Roger (or Elliot) have looked into VTS? I did not see prior comments on Roger's site.
 
Roger and Elliot have really impressed me with their commanding knowledge -- be it via the publications, chats, etc. -- and I am looking forward to learning more re smart bonds this Thursday. Roger's research and ability to communicate truly towers over 99% of others attempting to guide investors. I am grateful to have become a subscriber and will likely add other Capitalist Times publications, as I weed out the my research sources. 
 
Thanks for all your help--Susan P.

A. Hi Susan
 
Thank you for writing. Vitesse is not one we've covered to date. We already track several oil and gas royalty-focused companies, including Black Stone Minerals LP (NYSE: BSM) on the High Yield Energy List. Alliance Resource Partners (NSDQ: ARLP) is a producer of coal and natural gas also on the model of paying out profit in dividends. Both are trading above their highest recommended entry points, 22 for Alliance and 15 for Black Stone. We see a lot of upside, with the caveat that dividends are likely to be volatile over time.
 
Vitesse's 5% dividend increase last month is I think a pretty good sign the trajectory for its payout is up. Management raised the mid-point of its FY2024 production guidance range from its lands by 3.9% and the mid-point of CAPEX by 40%. That's a major plus in an environment where many companies are cutting output and prices appear to have bottomed and are moving higher. And it demonstrates management's successful acquisition
strategy in recent years. In contrast to Black Stone, the company has debt, as well as a very low market capitalization of $700 million or so (Black Stone's is $3.3 bil). And it's also heavily focused in the Bakken, which generally speaking is not as attractive for export markets as Black Stone's Texas properties. 
 
Bottom line is I prefer Black Stone, which also yields about a percentage point more. But this is one we may pick up. Thank you for the suggestion.
 
Q. Hi Roger,
 
Bond King Bill Gross calls Western Midstream Partners, LP the best-of-breed in an undervalued sector. I saw mention of it in a recent monthly Chat- is it in any of your portfolios? If so which one? Are you still recommending it? It's yield is pretty substantial but it has run up about $10 in a short time. Appreciate your view on it and if it's still a buy at almost $40. Thanks.--Sohel
 
A. Hi Sohel 
 
Western Midstream understandably got a big boost this spring when they raised the quarterly dividend to 87.5 cents from the
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previous 5.75 cents. It was more than most expected and, equally important, management made a good case why the company can sustain it. The Meritage acquisition left the company very well positioned in the Permian Basin, despite continuing dependence on Occidental Petroleum--the acquirer of Western's former general partner and main customer Anadarko. We consider the OXY connection including 48.79% ownership to be a net negative, given that company's stated strategy of not expanding output. But the yield as a standalone company is attractive and the dividend is likely to continue to be increased, though at a slower rate than this year. Our highest recommended entry point is still 35--we track it in the "MLPs and Midstream" coverage universe tracked on the EIA website. And at the current price of 38 and change, there are several midstreams we prefer, which are currently in the portfolio. But the assets are solid, And our view is the most likely endgame is a sale by OXY of its shares.
 
Q. Hello Roger,
I was trying to buy some of the NEP bonds you recommended, but the brokerage said it is not purchasable (section 144A) by the individuals, only corporate. I tried the other NEP bonds - they are all section 144A. Is there a way for me to buy the one you've recommended or similar? Thank you.--Marianna K.
 
A. Hi Marianna
 
Thanks for writing. A number of NextEra Energy Partners' bonds were sold in private placements. So unfortunately, they might not be available in inventory, depending on the broker. The individual bond market does tend to trade by appointment--at least for anything you'd want to buy. The 6.926% convertible preferred maturing in Sept 2025 should be available for purchase. I recommended it in the December 2023 feature article where I mentioned the bond. It's up about 17% since then not including dividends but still has upside in my view to the conversion next year.
 
By the way, your experience—which I’ve encountered also—is a big reason why we’re launching the new ETF-based bond service
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"Smart Bonds." If you missed our webinar, give Sherry a call at 1-877-302-0749, 9-5 ET and she'll send you a link to the recording.
 
Q, Roger,
I again want to thank you for all your help since I subscribed. I ask few questions but read each chat and report throughly. 
 
Now, let me ask a couple of questions:
1.   Have you established dream prices for BHP or NEM?
2.   I read the REIT sheet because they represent an important piece of my portfolio. Is there a separate website that you maintain for REITs as you do for EIA and CUI?
3.   I’m almost 84 and depend on income from interest, dividends and distributions to cover living expenses. Therefore, I’m not interested in your trading services as my goal is to hold solid high yield investments for 3 to 5 years or longer. Are there other income oriented, fundamentals-focused services that you offer? I am looking for a good source of fundamental research for Business Development Corporations.--Ron M
 
A. Hi Ron
 
Thanks for writing. I don't have anything official
2:03
as far as a Dream Buy price for either BHP or Newmont. But I would say both are pretty much there at this point. Newmont did get under $30 briefly earlier this year following Q4 earnings and has come up quite a bit since. And BHP has been in the mid-50s several times this year. But it looks to me like we're still pretty much at cycle lows as investors focus on monetary policy. Meanwhile both companies have stabilized earnings and are executing on very strong investment plans--my upside target for both is still 100 plus. I think we'll get there in the next 2-3 years, though it will require patience.
 
We don't really have the economics at this time for a separate website for the REIT Sheet. But we do privately archive issues if that's of interest.
 
Lastly, thanks for your interest in our income oriented services. We are launching a new bond service "Smart Bonds," which takes a different approach to investing in bonds using ETFs. The others are Conrad's Utility Investor--which will next post July 8.
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