I like DOM here. The chart is for the last 5 years. The yield over that period has averaged over 13%. The endless crushing of NG prices in the US, as shale reserves have ballooned in size, has already done its damage.
The increases in natural gas reserves have affected the yield on all of these trusts as the price of NG has crashed to historically low levels compared to crude oil. The old ratio was around the BTU equivalency ratio of 6-1, today its around 22-1 in the US. The same ratio using international LNG prices is around 7 to 1.
That’s OK, because the better ran trusts have been able to increase the depth of their assets by purchasing weaker held properties with known production qualities.
This small forgotten about trust is a great way to leverage a longer term rise in NG prices, as LNG starts to be exported from the US in the incoming years. It has maintained a real yield, and is liquid for its market cap size.
The company does not have any options market, so there is no way to try and leverage up the yield with a covered call strategy. However, with a yield of 7.4% it gives an investor a great way to be reward in this market with a steady diet of cash dividends.
As the US starts to change its LNG import facilities, into LNG export facilities, natural gas trusts like SJT and DOM will again find a growing interest in their dividend yield. The world price for LNG is currently around $12 per MFC (give or take a few dollars) while the price for the same LNG in the US is around $4.
This is a long term investment idea that plays on the price arbitrage of Global LNG vs future US LNG prices, that should work in the favor of a patient investor. It comes with a nice high cash dividend yield to pay you while you wait.
Disclosure: no exposure to any stock or commodity named in this article.