Utility DTE Energy (DTE) has released very nice earnings. DTE is a Detroit based utility providing electricity and natural gas to parts of Michigan.
Now when I say ‘very nice’ I mean, very nice for the times we live in.
While earnings were down around 15% from the year ago quarter they remained very respectable.
I was quite surprised that the company ‘reaffirmed’ their operating earnings outlook for the full year–seems pretty optimistic to me.
The company has 4 baby bonds outstanding which can be seen here. Disclosure–I own 3 of the 4 issues which I bought at much lower prices. All issues are now at or above $25.
29 thoughts on “Nice Earnings From DTE Energy”
I own some DTE common and agree the quarterly was OK considering. I’ve been a customer for 51 years (my parents paid the bill before that). Their performance in the field has vastly improved over the last couple of years – much better maintenance and fewer outages. Their management and diversification have been excellent as well. The apparent knock on them is the Detroit thing – if the automakers hiccup, they do, too. So they haven’t rebounded like, say, NEE (or even XEL, which serviced my daughter and maybe Tim?). I also have some DTY since March 18. The yield is fine even now, but it’s over par and I’d guess it’ll get called in 2021.
In re your remarks about KTH, are you assuming that Structured Products Corp. itself is too big to fail, or won’t it make any difference to holders of KTH?
David, The structured products was just a “name brand” from then Smith Barney slapped on it. There was many “structured product” Smith Barney issued “preferreds” back in the day, but they serve no purpose anymore. See back 20 years ago there really was no “baby bond” market. So brokerages would buy $1000 bonds and repackage them in $25 issues for small retail investors to buy to get access to the rip off bond market. Over the years almost all have been redeemed.
KTH hasnt been redeemed because the underlying PECO bond was issued uncallable. KTH is as safe as PECO stays safe. The bonds are in trust. Smith Barney issued $25 certificates that ultimately lay claim to $27.10 of maturing PECO 2028 subordinate debt issuance. So unless someone steals the bonds laying in US Banks’s “vault”, you essentially own the bonds via the trust certificates. The original bond was issued in 1998 and matures in 2028. KTH was set up to be redeemed at the actual underlying bonds maturity.
David, FWIW, If you are interested, here is the actual bond that is held in trust. Smith Barney only bought some of the float and inserted it into a trust for KTH. Being long ago institutionalized the bond rarely trades. But it actually did trade today at $111.66 which largely mirrors YTM of KTH. I would suspect trying to buy the bond would be very hard, and then then you have to work around the bond thieving desk that likely wouldn’t give you that price anyways if they bothered to even look to find you any.
Grid, are you still holding KTN and if so do you prefer KTH over KTN are both about equal in your mind? Thank you in advance.
Haz, I have no problem owning either both higher quality but unrelated industries of course. I just sold the last of my KTN yesterday at $29.99. Had a good run with it. As always, will look to get back in at lower price. If you are holding long term to collect coupon until maturity you need to plug into a YTM calculator to decide what is an acceptable return holding and then set your buy point there. Remember KTN has a $1.025 interest payment kicking out end of June, while KTH just went exD. KTH has a $27.10 maturity price while KTN is the standard $25.
KTH is still a top 5 position hold for me, but I bought at much lower price. If it heads back near $32 I may jettison some there and wait to reenter. I have owned these both off and on for 6-7 years.
As always Grid thanks for your willingness to share your knowledge with others. Always appreciated.
Haz and Dave, Since I ran out of options and bought KTN back today after selling yesterday 24 cents higher, so I thought of this. You may be interested in understanding the underlying bond trading…KTN is like KTH in that there is an actual trading float of the bond outside of the trust. The bond traded over $120 today and here is the link to the bond if you havent seen it before.
Hello Tim; Do you have any utility preferreds that have really good call protection that are still priced close to par with a nice coupon of say 5 1/2 or more??? Not asking for much am I???? LOL The IPLDP can still be gotten for a good price but the only thing I don’t like is the 5.1% coupon. I do own 3,200 shares of it and I won’t add much more as its callable at anytime.
Chuck P–let me get back to you–just heading out of the office.
Chuck, you are asking for the impossible with all your requirements. There are a couple of them over 5.5% and even plus 6% and I own them (but largely have for years and years, as holds and trade vehicles) but you will get zip, zero call protection and a lot of call loss risk.
Your closest YTM issue that would meet your requirements is KTH which I also own quite a bit of. It is noncallable and allowing for fact it went exD today (Im assuming it was as it should be, but didnt confirm) it would be a YTM of 5.35% at its 4/2028 maturity. PECO is PA largest electric/gas utility. The paper is rated A3. But its interest income and trust debt off an underlying noncallable subordinate debt issue that needs to be held in tax free accounts to avoid “adjusted tax” issues.
There are some nice quality canadian ute preferreds that would meet your requirement, but you will have to deal with Canadian currency risk and 15% witholding in taxable that you may or may not be able to reclaim as a credit come tax time. I receive the entire 15% back but my situation may be different than yours.
Thank you so much for all the help that you provide to all of us, you are doing a wonderful job with your expertise..I will like to find out what are the requirements as a US citizen of not paying this 15% on the Canadian ute’s..
Thank you again
Stay safe and healthy
God bless all
The Canadian tax is withheld from dividends including, in many cases, dividends to US “federally tax exempt” retirement accounts. You will receive the net dividend amount after withholding. So payment is NOT optional to keep all honest. Does this help you?
I know that there is something that Gridbird would like to add. He is the expert extraordinaire on the subject.
Thank you Dave, I forgot to tell that I am talking about IRA’S accounts..is a bit confusing for me ..
Thank you Dave
Stay safe and healthy
God bless all
Danny, you just call and threaten to beat them up if they withhold anything and that should take care of the problem….Ok seriously now…Dave is correct on what he said. There are random problems with some preferreds in various brokerages withholding the 15% anyways. Even from same brokerage, for example, I would have some treated correctly and others not. And not much help to get problem resolved either. So I just went the taxable way, let them have it and then get it back come tax time. It wasnt a problem at all through turbo tax for me. There is no way around the initial 15% withholding if in taxable account as they will take it and you will have to file via a foreign tax credit to get it back. One needs to know their income situation as this could inhibit you being able to lay claim to the entire withholding.
Thank you Grid bird,
I guess in the IRA is no hope of getting the 15% back..
Thank you for your info/help
Stay safe and healthy
God bless you all
Danny, But remember that is only if you buy the wrong one from the wrong brokerage. If you narrow some down, some here may have experience with it and can tell you…For example for me, though I dont own them anymore I owned last year a couple of Enbridge preferreds in tax free at TD and Vanguard and they were handled correctly. Fortis was no problem either. An Emera one was withheld improperly and another online friend made 6 hell raising calls and finally got that one fixed. One Altagas issue and Canadian Utilities issues caused me problems in getting withheld then though….So its a box of chocolates!
Thank you so much for the info/help Gridbird you are a wonderful guy !
Stay safe and healthy
God bless you
Danny, many here are to help best they can, just ask. I have had the good fortune of having great returns owning preferreds, I have clawed my way to almost 4% and this coming week divi dump should put me over since they went exD weeks ago….I only mention that to emphasize the next point…
I got in Canadian issues about 18 months ago, and just jumped out of the gate. It was so easy, Im a true genius going North making 20% in a couple months I thought…Then in a blink of an eye all the sudden I am in the hole. Sold, licked my wounds let them drop more…Get back in, and Im way back in black again…Im smart this time! Then someone snapped their fingers and Im back in the hole again. Threw in the towel on the resets, and just bought fixed issues in recent past and got those losses back.
Wasted a lot of time and effort as these are volatile especially the resets, and amazingly the fixed issues are also somewhat anchored in trading patterns with the resets. I could have just thrown that money in a mattress 18 months ago and saved myself the agony….I like the quality of the few fixed Canadian issues I own, but its been a battle compared to the US issues. Resets really are probably meant for long term counter play holds all while collecting a decent dividend. Something I find myself maybe not suited for.
Danny added thought… Everything is through ones eyes of expectations though. If you are interested in resets understand what causes the movements. Part of my problem was I thought I knew the directional future movements of 5 yr bond….Ooops wrong! I thought I could apply my fairly strict discipline of quality and trading ranges to Canadian issues…Ooops wrong again! It works like a charm here, for me in what I own and am willing to own (which isnt much granted), but not so much up North. I am up nicely on a couple fixed Canadian Fixed utes that their present yield has came down over a 100 bps. Their present yield is low enough for me to admittedly consider locking down the profits and move the money south. My recent Sun Life purchase has done well too, but I still own a small amount of a Fairfax issue that never tires of beating me bare bottom behind the woodshed. I may sell them all and take a Canadian timeout for a bit.
You may want to checkout DCUE – but it’s a mandatory convertible from the wonderful Dominion Energy. DTP is also a mandatory convertible. Not very long call protection, but just tossing out a few names for ya’. CNP-B is another mandatory convert, but it has a lot of fleas.
DTJ has a decent price on it still and yields 5.375 with a dual IG rating (know you love those). First call is a lil more than a year from now.
ETI- has call protection for more than 4 years and is papered at 5.375%… single IG rating.
SREA has gotten away from us in price but isn’t too bad for 4 years of call protection.
Disclosure: I own all of these.
Affinity; Thank You I appreciate all the great info.
Chuck, just remember mandatory convertibles are not preferred stock in the sense that one typically buys them for. They usually are nothing more than a common stock masquerading as a preferred as they are totally tethered to the common. That is why CNP-B is hopelessly below “par”. As once issued “par” means nothing ever again, unless some miracle liquidation occurred. You get the modest short duration cap structure dividend protection from a suspension, but that is it.
ETI? is that the right symbol?
He is correct…ETI-, ETI-P, ETI-PR, etc. Depends on your brokerage.
ok, i see it now. Entergy preferred.
Chuck–I assume you are looking for qualified dividends? The best buys (current yield) are in the baby bonds–but of course not qualified. I own the Spire (SR-A) 5.90% preferred–which has shot up to 27 in the last 2 days (current yield of 5.5%) from around 25.50 last week–I would watch that to see if it drops back. Nisource has a 6.5% issue but it is trading at 27 also (current yield of 6%). Duke has DUK-A has a 5.75% issue which I also own–again now trading over 27 with a current yield of 5.26%. I wouldn’t hesitate to buy these at a lower price–maybe 26 or so.
Here is the master list of preferreds and baby bonds in the utilities.
Thanks, Tim, for all the work you do.
I can tell by the volume of chatter that your site is increasing in popularity almost daily.
Yes Ron–crazy markets make for lots of activity.