NuStar Energy From The Perspective Of A Preferred Investor
As detailed in Finviz:
NuStar Energy L.P., NS, engages in the terminalling, storage, and marketing of petroleum products. The company also engages in the transportation of petroleum products and anhydrous ammonia. It operates through three segments: Pipeline, Storage, and Fuels Marketing. The Pipeline segment transports refined petroleum products, crude oil, and anhydrous ammonia. The Storage segment owns terminal and storage facilities, which offer storage, handling, and other services for petroleum products, crude oil, specialty chemicals, and other liquids. This segment also provides pilotage, tug assistance, line handling, launch, emergency response, and other ship services. The Fuels Marketing segment is involved in the purchase of crude oil, fuel oil, bunker fuel, fuel oil blending components, and other refined products for resale. As of December 31, 2018, the company had 3,130 miles of refined product pipelines and 2,070 miles of crude oil pipelines in Texas, Oklahoma, Kansas, Colorado, and New Mexico; a 2,150-mile refined product pipeline originating in southern Kansas and terminating at Jamestown, North Dakota; a 450-mile refined product pipeline originating at Marathon Petroleum Corporation's Mandan, North Dakota refinery and terminating in Minneapolis, Minnesota; 2,000 miles of anhydrous ammonia pipelines; and 75 terminal and storage facilities, which offer approximately 88 million barrels of storage capacity.
Bottom line
This is a very large company holding many assets, and as far as this preferred investor is concerned, existentially, this company should be a sound investment. Therefore, the only thing that remains to be determined is which of the preferred shares it offers is the best buy at the current prices. Also for our purposes, I will add its lone Note into the mix.
Symbol | Callable | Matures | Yearly Dividend | Price | Dividend/Price | Yield % | Best |
NS-A | 12/15/21 | NA | 2.125 | 23.92 | 2.125/23.92 | 8.88 | |
NS-B | 6/15/22 | NA | 1.90625 | 21.62 | 1.90625/21.62 | 8.82 | B |
NS-C | 12/15/22 | NA | 2.25 | 25.06 | 2.25/25.06 | 8.98 | |
NSS | 1/15/18 | 1/15/43 | 1.90625 | 26.33 | 1.90625/26.33 | 7.24 |
Frankly, I like the B best in spite of the fact it offers the lowest yield at the current price. I like it for several reasons:
- Although I consider a preferred in this company a relatively safe bet, one never knows, therefore, you are risking less than $2/share for a yield % only .06% lower than the next lowest priced preferred, the A-series.
- Although not the last callable, the B is second to last and only can be called a mere six months prior to the C series, which happens to be priced at a costly $25.06 even though it offers the highest yield %, 8.98%.
- If and when called, the B offers, by far, the largest upside capital gain of 25.00 - 21.62 = 3.38/share called.
- Concerning the Note: In the event of bankruptcy, its holder is paid before the preferred shareholders, however, who knows what would be left for him to collect. And if you fear perpetual preferred shares and feel safer with a maturity date, 2043, as far as I'm concerned, this Note would offer you little protection.
Obviously there is substantially more to consider prior to investing in any company preferred.
This is my opening article as a TalkMarkets contributor. I'm simply an average market investor with one claim to fame: I know more about preferred investing than most, and the majority of my ...
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Hi, Norman! Where did that ranking graphic come from?
Hi Panda:
When I was a SA contributor, it appears that they scored all contributor articles and according to the clicks or hits I received, I was scored in each of the categories listed, which my article touched upon. All contributors received such scores. I was proud, in so short a time, to reach the top of my field of concern.
Good read.