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8/31/21 Energy & Income Advisor Live Chat
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AvatarRoger Conrad
3:16
Hi Sohel. That really depends on what you already own. We're still convinced the midstream companies/MLPs we've focused on this year are still the best places to look. They proved their resilience in the pandemic year and Q2 numbers and guidance show they've adapted to where we are in the cycle now, generating free cash flow after dividends and all CAPEX despite generally lower volumes than prior to the pandemic. I highlighted EPD and Energy Transfer (NYSE: ET) as great fresh money MLP buys in the current EIA issue feature article. But really, any of the midstreams and MLPs reviewed in the Portfolio section would make a great addition now: Hess Midstream for example yields nearly 8% after boosting its payout 11% plus earlier this month. MPLX yields almost 10% despite being up more than 30% year to date.
JT
3:22
Do you cover Annaly in your REIT Sheet? If so, what is your opinion?
AvatarRoger Conrad
3:22
I do, along with half a dozen other mortgage REITs. Generally speaking, I advise caution with all of them. Cash flows from this group are extremely cyclical--basically exposed to both credit and interest rate risk. Annaly has been a survivor but that hasn't prevented its earnings and share price from being quite volatile--with the dividend cut twice in the past two plus years. I rate it a hold. But if you're looking for a financial REIT with real promise, I would check out lower yielding but far more steadier and faster growing Hannon Armstrong Sustainable (NYSE: HASI), which has a very strong niche position in lending/investing in renewable energy and energy efficiency projects. That's a much faster growing area and Hannon's specialization gives it an edge competing for investments that Annaly and more convention M-REITs don't have.
AvatarRoger Conrad
3:23
And if anyone is interested in the REIT Sheet, please do give Sherry a call at 1-877-302-0749, Monday through Friday, 9 to 5 pm ET.
Jim T
3:54
Roger,
AvatarRoger Conrad
3:54
Hi Jim
Terry
3:58
Is Cummins, Inc. (CMI) a company you would consider covering in EIA given their hydrogen engine program?
AvatarElliott Gue
3:58
We don't cover it in Energy & Income Advisor at this time. However, I do cover CMI and a number of other industrial stocks over in EIA's sister publication Deep Dive Investing. There are some valid energy angles in the space like CMI's line of  engines. I'd also highlight HVAC as being an area where there are a lot of potential energy gains through new systems that are more efficient. Another one is agriculture and names like DE and CNHI, which are increasingly employing precision agriculture technologies which reduce energy use needed to produce food.
Jim T
4:04
Roger,  What is your current assessment of IPPLF?
AvatarRoger Conrad
4:04
Brookfield Infrastructure Partners (TSX: BIP-U, NYSE: BIP), the unit of Brookfield Asset Management (TSX: BAM/A, NYSE: BAM) announced last week that it had acquired 73% of Inter Pipeline shares, with the offer to remain open until September 3 for tendering. That would be our advice now for anyone still owning the stock, since the success of Brookfield's offer is all but assured and it can be difficult to cash out once tenders are completed. The offer is CAD20 in cash or 0.25 shares of BIP, with the final amount subject to proration depending on what's requested. As of August 25, most bids were cash, not surprising since that's why large investors seemed to prefer this offer to Pembina's, which was all-stock. That means tendering will likely bring stock. BIP is now trading at CAD71.17, so the value of 0.25 shares is only about CAD17.80. Inter Pipeline is today trading at CAD20, so alternatively it could be sold for about the same price.
AvatarRoger Conrad
4:05
For the record I preferred Pembina's bid as having more upside to the energy cycle. But that's water under the bridge. The best thing to do now is sell.
Frank
5:18
Thoughts on PAGP
AvatarRoger Conrad
5:18
Hi Frank. We highlight Plains' Q2 results in the Portfolio section of the current EIA issue--which are basically those of Plains All-American Pipeline (NYSE: PAA). As we've pointed out before, this company and NuStar Energy (NYSE: NS) are the most volume-sensitive of the midstream companies/MLPs we recommend. That forced both to cut distributions last year. But we believe it will provide considerable upside leverage as this energy price cycle progresses. And in the meantime, the dividend cut along with asset sales, debt reduction and increased operating focus has adapted Plains to where we are now in the cycle. The current dividend level is safe for both PAGP and PAA and it looks like Moody's will restore Plains' investment grade credit rating in the next 6-9 months as well. We continue to like it up to a much higher price, though again volume sensitivity is likely to keep shares volatile.
Guest
5:40
Hi Elliott, I wanted to follow up on your masterful calls on increased NG prices and UNG. Would love to hear your outlook for the rest of the year, both short and long term. Apologies if this was already covered.
AvatarElliott Gue
5:40
Thanks! My sense is that natural gas prices have a bit more upside toward that $5/MMBtu region, between now and the end of October. From a fundamental standpoint, there's not enough gas in storage and so the price of natgas needs to rise to a level that incentives more production ahead of the start of winter heating season. Longer term, gas will always have a weather driven component and so it will depend on how winter heating season shapes up. The important thing though is that I think the era of depressed gas prices (over the past many years) is finally over, so we're going to see gas trading upwards of $3/MMBtu a lot more frequently than we've seen in more than a decade.
AvatarRoger Conrad
6:03
Well that looks like all of the questions for this month. Thanks again everyone for participating today. We always get a lot out of these events and will look forward to September's. As a reminder, we will send you a link to the complete Q&A transcript tomorrow, which will also be posted on the site. Have a great evening!
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