Monthly Distributions Increases Attractiveness $VNR
Dividend based portfolios are a good idea when filled with the right stocks. Here is one that not only delivers well on that level but also shows room for lots of growth. Not many companies can take care of their investors as well as this one does.
Vanguard Natural Resources LLC (VNR) is a nimble $1.5 B market cap exploration and development company specializing in oil and gas assets onshore in North America. VNR has an eye catching 8.24% distribution, which has increased an average of 7.14%/year since 2007. Aside from this impressive attribute, there is more that attracts me to this upstream MLP.
VNR recently switched from a quarterly to a monthly distribution schedule, which allows interest to compound slightly faster when the distributions are reinvested. A monthly dividend schedule also offers a more stable share price, as dividend chasing investors will be less likely to buy before the ex-dividend date, and sell after the pay date to only capture these payouts. This should keep VNR’s share price more steady and less volatile around these dividend qualification dates. In addition, VNR doesn’t have a general partner. This is a positive, as investors can enjoy unfiltered distributions since these payouts won’t be skimmed off by IDRs.
VNR estimates the EBITDA/Capex ratio will weaken very slightly through 2012, and should result in the 5x range, which is still very attractive. In this exercise, I was rather disappointed by LINE’s seemingly poor 1.8x ratio. I suppose since LINE is so much larger, they can still operate with this weaker metric. Also, compared to BBEP, LGCY and EVEP, it seems VNR had much more funding available for operation expansion and future acquisitions. These ratios speak to management’s responsible spending policies, which leads us to our next strong point.
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