This afternoon I made a lineup change. I benched TC Pipelines and brought in the 6th man, Linn Energy. I rarely sell stocks, but I felt it was time to do something about TCP's poor performance. TCP has been disappointing ever since I bought it May of last year. I like what LINE has to offer and feel more comfortable owning a slice of their business. TCP was sold @ $41.50 and I bought 60 shares of LINE with the proceeds. TCP is a pipeline company while LINE acquires and develops oil & natural gas properties. The business models are different, but they are both MLPs. Reasons why I did this swap:
#1 Linn Energy is more diversified. Their main business is natural gas, but they also deal in oil. TCP is natural gas pipelines only. While Linn is not a pipeline company they managed to hedge 100% of expected natural gas production until 2015. This is a smart move because natural gas is very cheap right now.
#2 Linn does not have a general partner (TC Pipelines does). They will not have to pay incentive distribution rights, always a plus when evaluating MLPs. It is typical for a MLP to issue new shares to expand business. Sometimes I feel like they do this to pad the profits of the general partner, more than act in the best interest of the unit holders. No need to worry with LINE.
#3 LINE has a higher yield.
#4 I anticipate Linn increasing distributions at a faster rate. They recently hiked the distribution by 5%, which is nothing to sneeze at for a yield above 7%.
The only thing that bugs me is that I sold TCP near the 52 week low. Maybe I would be better off waiting, but unfortunately I don't have a crystal ball to tell me the right answers. My total return with TCP was -5.67% including distributions received.
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