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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks
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To: bill who wrote (1736)10/31/2001 8:13:27 AM
From: Lorne Larson  Read Replies (1) of 11633
 
Overvalued as compared to the other oil and gas trusts (may be good value in terms of the energy market as a whole). I'm simply looking at yields. If you look at AVN, which is another gassy trust, the yield based on a price of $7.75 and a distribution of $1.80 per year is 23%. SHN presently trades at around $14.00. A yield of 23% would imply a distribution of $3.22 per year. The last quarterly distribution by SHN was the September declared distribution of .70, which extrapolates to a yearly distribution of $2.80. No way, in my opinion, is SHN going to be able to maintain this distribution based on NG prices in the Sep, Oct, Nov. I'm guessing maybe .40 for the next one to be declared in December, which extrapolates to $1.60 per year. At that rate a yield of 23% implies a price of $6.95.

A similar comparison could be made with PWI, VKR, and most of the other trusts. I'm not at all sure why SHN is given this kind of a premium. It is the gassiest trust, and doesn't hedge much, and I would assume therefore that it is a play on the expectation that NG prices are going to continue to move upwards, particularly over the long term. Anyway I've been around long enough to know that there's no point in beating your head against the wall, so I've closed out my short position. But I won't be buying.
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