News I've Been Waiting A Month For
- I was wrong
- But I’m still right
- The 7.7% dividend you just missed
I’ve been waiting for the Energy Information Administration to release their updated natural gas estimates. I thought – as did many other analysts – that their new methods for gathering those estimates would reveal less natural gas supply.
I got it wrong. But instead of trying to smooth it over, or denying the obvious, it’s much better for our reader-writer relationship if I come clean.
The EIA’s numbers released this morning show that supply increased 1.6% from January to February.
Obviously, this news is the exact opposite of what I predicted would happen – and in some ways it’s the opposite of what the market expected. Natural gas futures immediately fell over 8% - down to $3.96 per thousand cubic feet from $4.30 levels earlier this week.
So I was obviously wrong about my prediction for the EIA numbers – but the important thing is that I’m still confident about the long-term bullish trend for the price of natural gas. Infact though futures are down 8% natural Gas Stocks are up across the board.
And if you bought natural gas companies on my recommendation at any point this month, you bought NEAR 12 month lows. That I wasn’t able to pinpoint an exact bottom, and that my prediction didn’t come true shows that timing a bottom can be tricky.
It also highlights the importance of averaging into any position – even one that you’re super excited and bullish about. And more to the point, this kind of price head-fake makes income producing natural gas investments all the more vital. It’s easy to average into a position and be patiently waiting for capital gains when you’re getting a quarterly check. And with natural gas prices STILL near their 12 month lows there are literally a dozen or so high-income producing natural gas companies.
Their stock prices have been beaten down for two years, but their dividend yield has stayed the same. These companies, even with prices near their historic all-time lows, are still profitable!
That’s good news. My favorite natural gas company had a 12% profit margin for fiscal year 2009. That was a period of time when natural gas prices fluctuated between $6 and $2.50. If they can hang on during a rough stretch like that, they’re the kind of company you want to own before prices rise.
I believe prices WILL rise in the next few months. Some energy analysts think they could double by September. I could be wrong. We could all be wrong in the short term.
But the fact remains that natural gas is still super cheap. Whether you buy into this trend today, last week or a month from now, you’re getting in early. Too early is better than too late, especially if you’re collecting a 7.7% dividend while you wait.
If you want to buy a cheap commodity stock and collect a 7.7% dividend, you just missed your chance. My favorite natural gas company just went ex-dividend for this quarter. Of course I still think this company is a great buy, but if you want to collect the dividend, you’ll have to wait another 3 months for the next one. Click here now to read my brief on this company and find out how you can get on board for the next dividend.
I hope some of you took my advice and will collect this dividend, but I’m also hoping that I can convince a few more of you to start building a position in natural gas. The fact that I was wrong on the timing means that it’s not too late.
Kevin McElroy
Editor
Resource Prospector
