UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: lobodoug Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 455674  
Subject: SDT - my losing Safe Bet choice Date: 11/16/2012 7:14 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 7
As an aside to all the discussion about next years contest, I want to point out that my "safe bet" (which has utterly failed to be one) has lost 40% of its value. However, its dividend is holding up rather nicely, so that now at nearly 18% return, it is one of the top dividend performers available.

Why is is doing so bad? Several possible reasons to consider:

1) Proposed changes in taxation of dividends, which hurts any stock primarily owned for a high dividend.

2) It is a spin-off (and still partially owned by) Sand Ridge Energy. Sand Ridge is tainted by its CEO having been a former cohort of McClendon at Chesapeake, and thus is SDT is tainted too.

3) Moderate drop in oil and HUGE drop in natural gas prices has affected returns.

Note that this is a royalty trust company - it will not pay dividends in perpetuity. The wells will produce less over time. Actual dividends will depend upon this drop in production, as well as the price of the oil and gas produced, over the life of the wells.

With a current dividend rate near 18% I'd say it is worth a look. That rate is based on 4x its most recent dividend. That dividend is its lowest so far, but drops in dividends are not due to dropping production, but the huge drop in the price of natural gas and more moderate drop in oil. SDT does hedge, but there are limits to how far out one can effectively hedge.

Cheers,

Doug
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Post of the Day:
TMFDeej's CAPS Blog

Activist Investors Unlocking Value at LSB Industries?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement