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Even dividend stock picks can get too pricey: I’m selling Magellan Midstream Partners on valuation

posted on June 7, 2013 at 6:41 pm

This is a tough one and I’d bet that many of you would disagree no matter what I decided.

The name in question is Magellan Midstream Partners (MMP), a member of my Dividend Income portfolio http://jubakpicks.com/jubak-dividend-income-portfolio/

This master limited partnership has been a very, very good addition to the portfolio. At the time of the initial buy, these units paid a 7.3% distribution. Since I added the units to the portfolio on December 6, 2005, they’ve gained 60.3% (to the close on June 7, 2013.)

And that’s the problem.

The partnership has increased distributions every year. From $1.45 in 2010 to $1.56 in 2011 to $1.78 in 2012, but the increases in distributions haven’t kept up with the increase—27.4% in 2011 and 30.6% in 2012, for example, in the price of the units.

Consequently, the yield on this holding has come down every year—from 6.55% in 2009 to 5.15% in 2010 to 4.52% in 2011 to 4.13% in 2012 to 3.9% right now.

Why is that an issue? Because that falling yield is a sign that dividend stocks have gotten too popular. Especially recently. Read more

The oil world turned upside down–and how to invest in the rise of the U.S. to top global producer by 2017

posted on November 20, 2012 at 8:30 am
Oil rigs - land

Five years ago I never imagined I’d type these words.

By 2017 the United States will overtake Saudi Arabia as the world’s largest oil producer.

In addition, according to the International Energy Agency, by 2015 the United States will overtake Russia to become the world’s largest natural gas producer.

The United States is now the fastest-growing oil and natural gas producer in the world. During the last five years, according to Citigroup, the United States has added 2.59 million barrels a day to total production.

You’d think there’s an investable angle there somewhere.

I can think of two. No make that three.

First, there are the stocks of the companies that are responsible for this huge surge in U.S. production.

Second, there are the stocks of the companies that will make money from solving the current bottleneck in getting this supply to market.

Third, there are the sectors in the U.S. economy that will reap benefits from lower U.S. energy prices beyond the general advantage flowing to the U.S. economy from lower energy costs.

Let me start with the general picture and then move to individual sectors and trends. Read more

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