Dividend Roulette With Refinery MLPs

Most recently, it announced third-quarter earnings of $0.86 per unit, and it will distribute $0.98 per unit, which goes ex-distribution on November 16 and pays on November 25.

Alon has a positive tangible net worth (barely), sells at an eye-watering 8.3 times book value, and its share price has risen 36% in the last 12 months, nice indeed but suggesting it may drop back a bit.

4. Finally, Calumet Specialty Products Partners LP (CLMT​) is the least attractive of the four. Although it has the broadest base of refined petroleum products, this doesn’t seem to lead to much profitability, even when oil prices are weak, as at present.

Indeed, it managed to report a loss in the third quarter, a period when oil prices had sunk to new lows. Its quarterly distribution is $0.685, giving it a yield of 10.3% at current prices. However, that’s not much good to us in the long run, since the company made a loss over the last four quarters.

What’s more, the stock price is down 6% in the last 12 months, negating much of the benefit of the distribution, and it sells at 2.4 times book value, with a negative tangible net worth. I frankly don’t understand why Calumet Specialty’s broader range of products prevents it from being as profitable as its peers, so I’d suggest avoiding it for now.

At the end of the day, these are risky stocks, but I can’t see why the environment shouldn’t continue to favor them for some time.

Plus, the 16% to 18% yields on the first three are not to be missed. They’re like finding $100 bills in the street.

But go small, however tempting they may be.

Good investing,

Martin Hutchinson

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