Monday, March 10, 2014

Two high risk income stocks in the LNG space. GLNG and TGP

Two high risk income stocks in the LNG space.

As you know when I pick a stock for income I like Dividend Machines.   I use only four criteria to pick those stocks.   Today, I will deviate from that sage advice to take a look at liquefied natural gas shippers.

Golar LNG, (symbol GLNG) and Teekay LNG Partners, (symbol TGP)

This post compares two potential stocks in the LNG shipper space.   Each produces nice dividends but they are very different.  Neither stock is a dividend machine so please realize these are less than safe bets.

GLNG has operational advantages in this space. GLNG has a newer fleet; it has excess capacity so that it can respond to changing demand easily; it has a unique platform for processing gas and it has very little debt.

Dividend History

GLNG’s dividend history goes back to 2007.    During the financial crisis of 2008 & 2009 they did not pay the dividend.   Listed below are the last four years of dividends pay by GLNG.

Currently in 2014, the first quarterly dividend paid was $.45.   That is annualized to $1.80 per share per year.   Earnings are $1.72 per share per year.    Current yield at $39.10 is 4.54%.   Debt to equity (D/E) ratio is a mere .3697.

Compare GLNG with Teekay Partners (TGP).    TGP paid their first quarter dividend of $.675 in 2014.   That is an annual dividend of $2.76.    At today’s price of $41.168 the yield is 6.7%.   TGP’s dividend history since 2010 is presented in the table below.

Right now you might want to jump on TGP but read on.   TGP has high debt; the D/E ratio for this stock is 13568.76.  

Covered Call Potential

Covered calls are not available on TGP today but GLNG has a very nice call I sold today.   The call is a June $45 for a premium of $1.72.    The Call analysis is presented in the table below.

Two stocks playing on the LNG industry for your consideration. Both are high risk and only one of them is in my portfolio.

Consider GLNG for a high risk income play.