Conflicting ethanol news side-by-side at Yahoo Finance
Sector Snap: Analyst says end of ethanol oversupply in sight
In Alternative Energy Hunt, Ethanol Under the Gun
These two news items were right next too each other on the summary page for VeraSun Energy (VSE: 4.21 -0.25 -5.61%), the largest pure play ethanol producer.
The first article reported an analyst from Oppenheimer & Co. had announced he believes the current oversupply of ethanol will disappear in the next 5-12 months. I am not sure there is really an oversupply because as far as I can tell, all ethanol producers are selling every gallon they are producing and I have not heard of any idle production. There has been a worry of an overbuilding of ethanol plants, but many have been cancelled or put on hold, and it appears production capacity will really level off the middle of 2009.
The second article focuses on the twin problems of corn ethanol’s bad public image and high corn costs that really cut into margins. There are some interesting comments on the politics of ethanol and the belief that the next administration would not be a supporter of corn ethanol as a renewable fuel. The article also discusses the hard times ethanol companies have fallen on, stock price wise, and getting financing for new plants. Again the cry for cellulosic ethanol is raised, but the article does point out that there are currently 134 producing grain ethanol plants and 61 under construction and exactly zero cellulose ethanol plants producing ethanol.
My own belief is that the U.S. will continue towards about 10% ethanol blend in all gasoline, for both clean air and reduced oil dependence reasons. This give an annual requirement of 18 million gallons and current production is about 7.5 million gallons with capacity peaking in 2010 at about 14 million gallons. The current Renewable Fuel Standard calls for 36 billion gallons by 2012 and the Democratic presidential candidates are calling for 60 million gallons by 2030. But of course they do not want it to be corn ethanol. I do not see any way to meet the RFS without significant corn ethanol production.
I also think that when/if cellulose ethanol become viable, it could benefit corn ethanol producers in several ways:
- Corn ethanol producers are natural candidates to switch to cellulose with their already built and functioning plants.
- Competition from cellulose feed-stocks should drive down corn costs as less is needed for fuel. Cellulose ethanol producers may be surprised what their feed-stocks cost once there is a market for them. See this story.
- The government will need to support ethanol prices so all of their “friends” who build cellulose ethanol plants can get a decent return on their investments.
I think VeraSun Energy, on its way to becoming the largest ethanol producer, will surprise many with its profitability over the next few years. I have started picking up a small position at current prices.
Note: I am long VSE.
Interesting dividend stocks OTC
Yesterday I did a stock screen for income stocks. The major requirements were dividend greater than 5%, dividend growth rate of greater than 5% and market cap less than $5 billion. Besides the usual crowd of REITs,utilities and banks a few interesting companies showed up. These are foreign stocks trading as ADRs in the over-the-counter (OTC) pink sheets. Finding any further information about some of these companies proved challenging, but I was able to dig up a little. Several of these piqued my interest and need further research. I thought I would share them here, and if you have any interest, do your own digging. Here is a little about the stocks I found:
- Boral, info: Australian building materials company. Growth is good in home country, U.S. arm has fallen on hard times, flattening overall profit growth. Market cap: $3.36 billion. Current yield: 4.9%.
- Rentokil Initial, info: United Kingdom based business service company. Rentokil’s subsidiaries provide services like pest control, cleaning, plant care and parcel delivery to business is countries in Europe, the Far East and Australia. Market cap: $3.44 billion. Current yield: 7.5%.
- Lend Lease Corp. info: Australia based provider of real estate services. This company provides real estate construction and investment management in Australia, Asia Pacific and Europe. Market cap: $4.38 billion. Current yield: 5.8%.
- Foschini, info: South African holding company of several retail companies. The companies offer clothing, sports apparel, cosmetics and jewelry to the South Africa middle class market. Market cap: $1.13 billion. Current yield: 6.7%.
Notes: All of the above stocks are sponsored ADRs. Market cap provided by Trade King stock screener. Current yield based on dividends paid in the last year.
These companies have all shown very nice dividend growth over the last few years. They all pay dividends twice a year, usually with a significant difference between the two payouts. It appears these companies do not follow the U.S. practice of steady dividends, instead calculate the dividend on actual profitability.
Before investing, I would definitely need to do some more homework. First, what are the tax withholding consequences? Next, the affects of changes in currency exchange rates. These appear to be very thinly traded, so they look like buy and hold propositions. Also, pricing info differs at various sources, so I would want to make sure my bid price is accurate.
If you are looking for some undiscovered, high yielding stocks I hope I have provided a few of interest.
Note: I currently do not have a position in any securities discussed.
Best Quote on Investing Ever!
From Bill Rempel, a.k.a. NO DooDahs! :
Forget the economy. Focus on the markets. Find a methodology or system that works for you, and stick with it.
I think all of the noise about recession, housing, mortgages, trade, etc. distract us from the goal (hopefully!) of making money. Bill hit it on the head. What are the markets and securities we are interested in doing?
My focus is to find companies that have a plan to increase their earnings in their niche. I try to find out what their plans and methods are and if they make sense to me. Then I look at the stock value in relation to whether I believe the management can be (more) profitable.
2nd Quarter Dividend News
I started the post a little differently, but now have dividend news coming fast and furious (and late!). I will use this post to update the 2nd quarter dividends for the stocks in my Income Portfolio. Updates will be accomplished as the dividends are declared. Most recent will near the top if you have read this post previously.
Terra Nitrogen | Declares Dividend
Terra Nitrogen Co. LP (TNH: 121.37 -2.79 -2.25%) has declared a 1st quarter dividend of $4.20. This is slightly below the Q4 dividend of $4.45 but well above the Q1, 2007 dividend of $1.57. TNH is majority owned and managed by Terra Industries (TRA: 45.68 +0.47 +1.04%) and pays the financial results of a single fertilizer plant. The company is currently riding the wave of high agricultural prices and supplies.
Inergy, L.P. | Investor Relations | Press Release
Inergy (NRGY: 25.38 -0.383 -1.49%) has declared a 61.5¢ for Q1, 2008. This is the 11th quarter in a row the dividend has increased and brings the yield on the current stock price to 8.6%. Inergy, L.P. is a retailer and distributor of propane fuel. They have been growing the business with numerous acquisitions of small, local propane companies. The propane business is very fragmented, giving NRGY lots of opportunity for future growth.
Atlas Pipeline Partners L.P. | Press Release
Atlas Pipeline Partners LP (APL: 38.75 -0.41 -1.05%) has declared a 94¢ dividend for Q1, 2008. This is a penny higher than Q4 2007 and 8¢ more than Q1, 2007. The stock yield is 8.7%. APL is a natural gas transmission and processing company. It is intertwined with Atlas America, Inc. (ATLS: 42.83 -1.52 -3.43%), Atlas Pipeline Holdings LP (AHD: 33.45 +0.21 +0.63%) and Atlas Energy Resources LLC (ATN: 38.60 -1.28 -3.21%). See the press release for the relationship details.
Monmouth Real Estate set Dividend
Monmouth Real Estate Investment Corp. (MNRTA: 6.28 +0.03 +0.48%) has declared a 60¢ dividend for Q2, 2008. This give the stock a current yield of 7.9%. Monmouth has been paying a dividend at this rate for at least 7 quarters. MNRTA is a REIT owning commercial real estate.
Penn West Energy Trust (PWE: 31.82 -1.24 -3.75%) is continuing to pay it’s 34¢ per share monthly distribution. The current stock yield is 13.1%. PWE is a Canadian oil and gas trust.
Note: I currently have a long position in NRGY, APL, PWE.
Is the party over for Gold and Silver?
I see oil making new record prices day after day, but continue to see gold trading in the low $900s. Looking at the price charts, I see that gold and silver peaked in mid March, with gold hitting $1,000+ and silver over $21 per ounce. The last 30 days for the metals look very trading range bound. I am not an expert in any commodity or a chart guru, I just think something is coming unbundled here and I have a few theories:
- Gold bugs are running short on new converts, putting a dent in supply/demand. I have a little trouble believing this with all of the noise you will find about any financial news concerning precious metals.
- Commodity inflation in general is starting to stall and the precious metals are the leading indicator.
- Dollar weakness will end, driving the aggressive money out of gold/silver into the dollar. When/if the dollar turns stronger, the pile on could be huge, seriously affecting gold and silver prices in dollar terms.
I looked at some historic pricing and gold traded in the $250 to $300 range from October 1999 until February 2002. About 28 months starting and ending at $300 with only one excursion up to $300 during that time. Is this type of trading range starting again? I am not a predictor, but the chart shows an interesting possibility:
I like these charts. Click on the different symbols to get perspective.
San Francisco real estate is hot again
I really do not have an opinion about this video. Just nice to see there are buyers somewhere for real estate. Maybe it isn’t the end of the world.
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