SILUNG (< 20)

I Just Want Cash

August 18, 2010 – Comments (0) | RELATED TICKERS: HGT , PBT

This has become my mindset. I'm no longer interested in trying to figure out the growth potential of a particular company in the short term. Everything from here on out is about going long. As in more than 12 months (2 years preferably). I had to re-evaluate my approach to investing and choose a strategy that fits my personality. Simplicity. That's all I want. Give me companies passing along some of their cash to the shareholders. This is a great time to collect dividends while we wait for the economy to do something. Maybe I'll invest in a few emerging market companies for long term growth, but companies paying dividends is where I want to focus my attention.

Right now, I like royalty trusts. We are still going to need fossil fuels in the future. Hugoton Royalty Trust and Permian Basin Royalty Trust are examples of companies benefiting from higher energy prices. I like Hugoton more because it mostly produces natural gas, something we have a lot of in America and will surely play a greater role in our energy needs. Both trusts have had significant increases in their distributions paid to unitholders.  Currently they pay 7 percent dividends. Hugoton (HGT), after deducting administrative expenses distributed 16 million or $0.41 per unit in the first quarter (versus 5 million or $0.14 per unit) and 18 million or $0.47 per unit in the second quarter (versus 4 million or $0.11 per unit). Permian (PBT), period ending in March, distributed 16 million or $0.35 per unit (versus 7 million or $0.16 per unit) and 17 million or $0.39 per unit (versus 6 million or $0.13 per unit) in the period ending in June. Since their distributions are taxed as ordinary income, hold them in an IRA. Both have had a recent run-up in their stock price, but I think they're still room for them to grow. These two companies are great commodities play. I believe oil and gas prices will continue to rise and HGT and PBT will profit.