Adding to the High Yield Portfolio

Today we added the Teekay LNG Partners (TGP), 9% perpetual preferred to (NYSE:TGP-A) the High Yield Income Portfolio.

Teekay and all associated companies released earnings today and generally they were very good for shipping companies.  Teekay LNG Partners is a master limited partnership with a large fleet of ships (although many of the ships are owned in partnership with others) which are typically leased for long periods of time–up to about 30 years.  LNG shipping has been a real growth business in the last 10 years as the supply of natural gas in the United States has expanded thanks to fracking.

The biggest problem we have with TGP is that there are a lot of new builds on order and historically ocean shippers get into financial trouble when they over commit to purchase of new ships.  This is not a problem now as the global economies have been strengthening, but in a recessionary time too many new builds on order can cause severe financial stress for a company.

Note that this is the 2nd LNG shipper in the portfolio as the GasLog Partners 8.20% fixed-to-floating perpetual preferred (GLOP-B) is in the portfolio as well.  Presently we have no real problem with this over exposure, but it is a situation that needs to be monitored.

Readers should be aware that personally we are much more conservative than this portfolio represents, although we do own the Spark Energy fixed-to-floating issue contained in this model.

With this purchase the model is 53% invested.  We will continue to search for a higher yield baby bond to add to the portfolio.

12 thoughts on “Adding to the High Yield Portfolio”

  1. Hi Tim,

    Your readers should know that this issue will present a K – 1 not a 1099. Everyone should also know that 100% of the distribution will be UBTI according to IR. Be careful holding too much in a tax-advantage account. I had to sell it out of my Roth before last December’s distribution otherwise I would’ve been over the $1000 limit forUBTI.

    1. Hi Tim,

      Do you have an opinion of GMLPP – a Golar issue? I own both GLOP – B and GMLPP and was thinking about adding to one of them. I am going to assume (what is probably obvious) – that you prefer Gaslog over Golar since you own GLOP-B. Thank you for this site and for all of your help!

      1. Hi Amy–I own it personally. I do not personally own GLOP-B. The conservative medium duration portfolio is most similar to my own stuff—I own most of the term preferreds and then some favorite baby bonds–for instance ABRN (which I am over loaded with). One of these days I will list what I own–I think it is probably 30-40 issues spread across a number of different accounts.

        These LNG shippers seem to have decent financials compared to the days of old bulk shippers which were run by total clowns.

        1. I would like to see your personal tickers, Tim, when you get the chance….I bought a little more ABRN this week. ABR had a very strong quarter results announced this week. I am overweight in ABRN myself, along with NSS, and ALLY-A.

      2. I too personally own both GMLPP and GLOPB…both still hanging near par with nice qualified dividends. Two other nice ones with 2020 call dates are ANHPRC and CORRPRA, both hanging near par also

        1. Hi Rick–I will be looking at issues such as ANH/C for the model portfolio–as you know I personally am not a current fan of perpetuals, but for this model there is no choice being a “high yield” model and I have been watching the mREIT preferreds for a potential purchase.

        2. Hi Rick–I will be looking at issues such as ANH/C for the model portfolio–as you know I personally am not a current fan of perpetuals, but for this model there is no choice being a “high yield” model and I have been watching the mREIT preferreds for a potential purchase.

  2. Hi Amy–thanks for pointing that out. I will try to add that type of info in the future as I get the website up and running on a full basis–right now as I get going I am mostly not doing deep dive stuff–just too much time and too much work–yikes.

    I guess more seasoned people would realize it is likely to issue a K-1 being a mlp–but some of the shippers do not–and some readers are not ‘seasoned’.

    Good luck

    Tim

    1. I am sure that you are correct in that most investers will know about the K-1 but what threw me for a loop….as well as a few VERY experienced pfd owners on siliconinvesteo.com,….is the ‘100% UBTI’ issue. From what these more-experienced investors told me, it is extremely odd for a pfd to throw odd 100% UBTI.

  3. Hi Tim

    Lovin’ the new web site.

    Curious why you chose TGP-A instead of TGP-B.
    – TGP-A is currently priced over par while TGP-B is under par.
    – TGP-B has fixed to floating protection while TGP-A does not.

    I’m long a lot of Teekay in my income portfolio (TGP-A, TGP-B and TOO-E).

    – Greg

    1. HI Greg–kind of a coin toss, but the floating on B isn’t for 9 years yet and the benefits that accrue to the floating rate issues are most effective the closer they are. But in the end it could have been either issue.

      Good luck
      Tim

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