First Look at NuStar Energy L.P. (NS)

A friend asked me to take a first look at NuStar Energy L.P. (NS).  It’s not a bargain yet.  Read the rest to learn why.

NuStar Energy L.P. (NS)

Price: $41.23 on 11/13/2012

Shares: 70.76 million

Market capitalization: $2.92 billion

What does the company do to earn profits?

Based in San Antonio, Texas, NuStar Energy L.P. is a master limited partnership spun off from refiner Valero Energy. Through growth and acquisitions, NuStar has become one of the world's largest independent liquids storage and transportation operators. Assets include 97 million barrels of storage capacity, 8,000 miles of pipeline across the Mid-Continent, Gulf Coast, Caribbean, and Europe. NuStar recently decided to sell 50% of its asphalt refining business to a joint venture.

Morningstar’s take:

NuStar Energy operates a geographically diverse network of crude oil and refined product pipelines and terminals that provides fairly steady, fee-based cash flow. NuStar differentiates itself from other MLPs with international assets which, though less predictable, add growth potential and diversify cash flow. Nearly half of NuStar's refined product terminal capacity--about 30 million barrels--is abroad in the U.K., the Caribbean, Canada, and Mexico. While foreign operations bring geopolitics, currency risk, and tax leakage into play, they can also provide better returns because these factors deter many of NuStar's competitors.

Bonds outstanding: no bond data at Morningstar.com.  That usually means they have no bonds outstanding.

Times bond interest earned: N/A

Preferred stock: N/A

DIVIDEND RECORD – NuStar has grown their dividend slightly since 2008, but they don’t have the earnings to sustain the dividend in the future.  Expect a cut.

Dividend: $1.11 quarterly

Dividend yield: 10.8%  ($4.44 annual dividend / $41.23 share price)

Dividend payout ratio: negative ratio ($4.44 / -$3.12 using 2012 Google Finance EPS) OR 207% ($4.44/$2.14 five yr avg. earning power)

EARNING POWER – $2.14 @ 70.76 million shares

(Earnings adjusted for changes in capitalization)

	EPS	Net income	Shares	Adjusted EPS
12/2007	$2.74	$150 M	47 M	$2.12
12/2008	$4.22	$254 M	53 M	$3.59
12/2009	$3.47	$255 M	55 M	$3.18
12/2010	$3.19	$239 M	63 M	$3.38
12/2011	$2.78	$221 M	65 M	$3.12
12/2012 (est)	($2.90)	($180.2 M)	70.76 M	($2.90) est

	EPS	Net income	Shares	Adjusted EPS
2012 Q1	$0.23	$26 M	70.76 M	$0.36
2012 Q2	($3.56)	($247 M)	70.76 M	($3.49)
2012 Q3	($0.09)	$4 M	70.76 M	$0.06
2012 Q4 (est)	$0.52	$36.8 M	70.76 M	$0.52
2012 total (est)	($2.90)	($180.2 M)	70.76 M	($2.90)

Six year average adjusted earnings per share is $2.14

Consider contrarian buying below $17.12 (8 times average adjusted EPS)

Consider value buying below $25.68 (12 times average adjusted EPS)

NuStar Energy L.P. (NS) is currently trading at 19.26 times average adjusted EPS.  This is almost speculatively pricing.

Consider speculative selling above $42.80 (20 times average adjusted EPS)

BALANCE SHEET – NuStar Energy has a weak balance sheet.

Book value per share: $37.57 ($2.659 B equity / 70.76 M shares)

Price to book value ratio: 1.09 (under 1.0 is good)

Tangible book value: $25.57 ($1.809 B tangible equity / 70.76 M shares)

Price to tangible book value ratio: 0.78

Current ratio: 0.78 ($864 M current assets / $1.11 B current liabilities) (over 2.0 is good)

Quick ratio:  0.096 ($107 M cash / $1.11 B current liabilities) (over 1.0 is good)

Debt to equity ratio: 0.58 (lower is better)

Percent of total assets:

            Real assets (property, plant, and equipment) – 58%

            Current assets – 16.11%

            Intangibles – 15.84%

            Other long term assets – 9.23%

CONCLUSION – Don’t be fooled by NuStar’s recent decline in price.  It isn’t a bargain yet.  The company is almost speculatively priced, has an unsustainable dividend, and a weak balance sheet.  I wouldn’t buy it until the price declines below $25.68 per share and the balance sheet improves in the several categories.

DISCLOSURE – I don’t own NuStar Energy L.P. (NS).

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Keynesian deficit spending madness

I will begin writing about high dividend stocks again after a little vacation.  I’m going to concentrate on non-US high dividend stocks.  But until then check out this interesting, short article on GDP growth.

Government deficit spending was the only reason the US 3^rd quarter GDP grow went up.  This is a recipe for disaster.

http://reason.com/blog/2012/10/29/3rd-quarter-gdp-growth-due-to-government

Of course, GDP is a made up Keynesian number that really makes no sense, but it is widely believed and followed by the public at large.  This article explains the inherent fallacies that make up the GDP number (C+I+G=Baloney http://mises.org/daily/4482 )

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A First Look at Giant Miner Rio Tinto

I use Google Alerts on “high dividend stocks” to see what is being published online on the subject.  Insider Monkey’s article got my attention because I hadn’t done a first look on any of his “5 High-growth, High Dividend Stocks”.  The five stocks are Rio Tinto (RIO), Enterprise Product Partners (EPD), Siemens AG (SI), Taiwan Semiconductor (TSM), and British Sky Broadcasting Group PLC (BSY)

http://www.insidermonkey.com/blog/5-high-growth-high-dividend-stocks-20007/

I write a first look at article on each of these.  Rio Tinto PLC (RIO) is the first one up.

Rio Tinto (RIO)

Price: $47.46

Shares: 1.85 billion

Market capitalization: $87.9 billion

What does the company do to earn profits?  Rio Tinto searches for and extracts a variety of minerals worldwide, with the heaviest concentrations in North America and Australia. Major products include aluminum, copper, diamonds, energy products, gold, industrial minerals, and iron ore. The 1995 merger of RTZ and CRA, via a dual-listed structure, created the present-day company. The two operate as a single business entity. Shareholders in each company have equivalent economic and voting rights in Rio as a whole.

Morningstar’s take: Rio Tinto is a top-tier global miner along with BHP Billiton BHP, Brazil's Vale VALE, and U.K.-based Anglo American AAUKY. A world-class asset base and capable management make Rio Tinto one of the few miners to earn more than its cost of capital through the commodity cycle. Geographic and product diversification give the company relatively stable cash flows and lower operating risk than many of its mining peers. Most revenue comes from the relative safe havens of Australia, North America, and Europe, though operations span six continents.

Bonds outstanding: none

Times bond interest earned: not applicable

Preferred stock: none.

DIVIDEND RECORD  Rio Tinto pays a semi-annual dividend.  The dividend payment amounts vary and are not predictable.  Here is the 5 year dividend history chart:

Dividend: $1.65 (annual dividend from FEB 2012 $0.91 and AUG 2012 $0.74)

Dividend yield: 3.4% ($1.65 annual dividend / $47.46 share price)

Dividend payout ratio: 73% using earning power of $2.24 per share from Google Finance –OR- 42% using average adjusted EPS of $3.91

EARNING POWER – $3.91 @ 1.85 billion shares

(Earnings adjusted for changes in capitalization)

Year	EPS	Net Income	Shares	Adjusted EPS
2006	$5.56	$7,438 M	1,339 M	$4.02
2007	$5.66	$7,312 M	1,291 M	$3.95
2008	$2.85	$3,676 M	1,334 M	$1.99
2009	$2.75	$4,872 M	1,770 M	$2.63
2010	$7.26	$14,324 M	1,973 M	$7.74
2011	$3.01	$5,826 M	1,936 M	$3.15
2012	?	?	1,850 M	?

Six year average adjusted earnings per share is $3.91

Consider contrarian buying below $31.28 (8 times average adjusted EPS)

Consider value buying below $46.92 (12 times average adjusted EPS)

Rio Tinto is currently trading at 12.1 times average adjusted EPS.  This stock is priced for investment.

Consider speculative selling above $78.20 (20 times average adjusted EPS)

BALANCE SHEET – Morningstar’s database is not working properly, so I don’t have the five year balance sheet data for Rio Tinto.

Book value per share: $33.98 ($62.861 B equity / 1.85 B shares)

Price to book value ratio: 1.4 (under 1.0 is good)

Tangible book value: $21.00 (equity - $23.997 B in intangibles / 1.85 B shares)

Price to tangible book value ratio: 2.26 (under 1.0 is really good)

Current ratio: 1.51 (over 2.0 is good) latest quarter

Quick ratio: 1.07 (over 1.0 is good)

Debt to equity ratio: 0.35 (lower is better)

Percent of total assets:

            Real assets (property, plant, and equipment) – 58.06%

            Current assets – 15.76%

            Intangibles – 13.38%

            Other long term assets – 12.8%

CONCLUSION – Rio Tinto is currently a decent dividend stock, but its dividend is not entirely safe.  The global recession currently underway will drop Rio Tinto’s price.  Their price will drop because worldwide demand for commodities lessens during recessions.  Their customers will buy less mined commodities at lower prices, which will hurt profitability.  Stay away from RIO until the depths of the recession.  This could be a long time.

DISCLOSURE – I don’t own Rio Tinto (RIO).

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

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I've been wrong about AGNC for the past year.

I’ll admit it.  I was wrong about American Capital Agency Corp. (AGNC) share price direction in the last year.  I thought that their shrinking interest rate spreads and dividend cuts would have hurt the share price, but they haven’t.  There has been a sustained 10 month rally in AGNC stock since November 2011.  Eventually this rally must end, but Keynesian investors don’t seem to care.  They love the Federal Reserve’s QE3.

AGNC is a mortgage REIT.  They make money by borrowing short term and then lend the money long term by buying agency mortgage backed securities.

Subscribe today for free at www.myhighdividendstocks.com to discover high dividend stocks with earning power and strong balance sheets.

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Marc Faber: Fed's QE Forever is Ludicrous; No Country Has Become Rich From Consumption

Marc Faber is dead on in this short article.  He points out that if money printing solved problems, then Zimbabwe would be an economic powerhouse.  If running huge deficits worked, then Greece would be the most successful European economy.

The Keynesian in charge of the central banks around the world are madmen.

Her is the short article from Marc Faber:

http://www.bi-me.com/main.php?id=59324&t=1&cg=4

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What If November Changes Nothing? by Andrew P. Napolitano

Neither candidate for the American presidency wants to end the Federal Reserve. Here is a list of many of the things they agree on. This is a race between a socialist and a national socialist. I won't be voting.

http://lewrockwell.com/napolitano/napolitano67.1.html

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Your First Step into the World of Bitcoins; An Excellent Primer.

The Wall Street investing game is rigged against you.  The theft of customer funds after the MF Global bankruptcy should have you worried about the safety of your brokerage account assets.

http://tinyurl.com/MFGlobalTheft

There is a new currency that you can buy to thwart the efforts of the Federal Reserve and the Wall Street banksters.  Do you have some of your investments in bitcoins?  Do you even know what a bitcoin is?  If you answered no to these two questions, then you had better read this concise, non-technical explanation of the bitcoin ecosystem:

http://blog.bitinstant.com/blog/2012/7/5/a-business-primer-on-the-bitcoin-ecosystem-erik-voorhees.html

You can listen to the article while driving in your car here:

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        <script type=”text/javascript” language=”javascript”>

               var recordingUrl = “http://www.spokentext.net/members/Gorbash91/A_Business_Primer_on_the_Bitcoin_...”;

               var width = “100”;

               var height = “20” ;   

        </script>

              

        <script type=”text/javascript” language=”javascript” src=”http://www.spokentext.net/display_player.php”></script>

        <!—End of SpokenText player à

I will be writing more about bitcoins in the future.  I’ll discuss how many of them that there will ever be, how they can be secured, and how much it costs to convert your national currency into bitcoins.

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