Williams Coal Seam Gas Royalty Trust
NYSE: WTU - March 4, 2009 Closing Price: $4.05
52-Week Range: $3.86 (March 3, 2009) - $11.25 (Aug. 11, 2008)
Yield: Variable - 10-Year Low/High Annual Payout = $0.88/unit-$2.51/unit.
The Williams Coal Seam Royalty Trust was formed in December 1992 to acquire and hold net profit interests in proven natural gas properties in the San Juan Basin of New Mexico and Colorado. The only assets of the Trust are the cash and cash equivalents (being held for payments of expenses, liabilities and Unit holder distributions) and the Royalty Interests. ‘Royalty Interests’ consist of a net profits interest [NPI] in the underlying properties.
Under Delaware law WTU pays no corporate tax rate and passes through all net income directly to its Unit holders who are then liable for taxes on the distributions received. The earnings per Unit essentially match the dividends declared each year. Income varies with natural gas prices.
The company has no debt – short or long term.
Here are the per unit numbers for this outstanding Royalty Trust since 2000:
Year ….… Sales …... EPS ….. Dividends ….Avg. P/E …. 52-Week Range
2000 ..... 1.74 …… 1.68 …….. 1.68 ………… 4.7x …….. $6.13 - $9.38
2001 …… 2.56 …… 2.50 …….. 2.51 ………… 5.9x …….. $8.06 - $21.99
2002 …… 0.96 …… 0.89 …….. 0.89 …….... 10.5x ……. $5.00 - $14.10
2003 …… 1.52 …… 1.44 …….. 1.45 ………… 8.0x …….. $8.68 - $14.30
2004 …… 1.59 …… 1.51 …….. 1.50 …….... 10.0x …... $12.65 - $18.98
2005 …… 1.49 …… 1.40 …….. 1.41 …….... 12.5x …..…$14.00 - $21.95
2006 …… 1.44 …… 1.34 …….. 1.34 …………11.7x ....…$10.10 - $23.05
2007 …… 0.98 …… 0.88 …….. 0.88 …………11.7x ….... $8.33 - $12.96
Final numbers for 2008 are not yet in but annual distributions were $1.47/unit.
The final quarter of 2008 included an extra $0.357338 /unit due to a “true up” adjustment.
The Q1 payout for 2009 was $0.113811.
WTU holders have received total income of $13.24 per unit over the past 9.25 years for an average annual distribution of $1.43. At yesterday’s virtual decade low unit price of $4.05 that would represent a 35.3% average annual income if the coming years provide the same distributions as those of the past.
Even at the first quarter’s depressed level of $0.113811 the current year would bring $0.4552 per unit or 11.24% in current yield. Compare that with your money market or bank CD rate today to see if it might look attractive.
Best of all is the capital gains potential.
Will natural gas prices stay at their present depressed levels or will they pick back up over time? I’m willing to bet they’ll go significantly higher. The actual prices of WTU units have never been cheaper. The 52-week low was hit during yesterday’s trading.
This is not the first time WTU has posted a scary-looking drop in price. Units peaked at $21.99 in 2001 before falling to $5.00 at the depths of the 2002 bear market. Savvy buyers back then watched their units surge to $14.30 in under one year and to $21.95 over the next three years. Plus, they collected $4.35 in total distributions over that 36 months.
A return to even previous actual annual LOW prices would bring exceptional gains while a rebound toward old highs in the $9 - $23 range would provide huge capital gains on top of the substantial current income stream.
Unless you are looking for a total collapse in natural gas pricing WTU units seem to offer the perfect blend of high income, extraordinary upside and low risk.
Disclosure: Author is long WTU units.
NYSE: WTU - March 4, 2009 Closing Price: $4.05
52-Week Range: $3.86 (March 3, 2009) - $11.25 (Aug. 11, 2008)
Yield: Variable - 10-Year Low/High Annual Payout = $0.88/unit-$2.51/unit.
The Williams Coal Seam Royalty Trust was formed in December 1992 to acquire and hold net profit interests in proven natural gas properties in the San Juan Basin of New Mexico and Colorado. The only assets of the Trust are the cash and cash equivalents (being held for payments of expenses, liabilities and Unit holder distributions) and the Royalty Interests. ‘Royalty Interests’ consist of a net profits interest [NPI] in the underlying properties.
Under Delaware law WTU pays no corporate tax rate and passes through all net income directly to its Unit holders who are then liable for taxes on the distributions received. The earnings per Unit essentially match the dividends declared each year. Income varies with natural gas prices.
The company has no debt – short or long term.
Here are the per unit numbers for this outstanding Royalty Trust since 2000:
Year ….… Sales …... EPS ….. Dividends ….Avg. P/E …. 52-Week Range
2000 ..... 1.74 …… 1.68 …….. 1.68 ………… 4.7x …….. $6.13 - $9.38
2001 …… 2.56 …… 2.50 …….. 2.51 ………… 5.9x …….. $8.06 - $21.99
2002 …… 0.96 …… 0.89 …….. 0.89 …….... 10.5x ……. $5.00 - $14.10
2003 …… 1.52 …… 1.44 …….. 1.45 ………… 8.0x …….. $8.68 - $14.30
2004 …… 1.59 …… 1.51 …….. 1.50 …….... 10.0x …... $12.65 - $18.98
2005 …… 1.49 …… 1.40 …….. 1.41 …….... 12.5x …..…$14.00 - $21.95
2006 …… 1.44 …… 1.34 …….. 1.34 …………11.7x ....…$10.10 - $23.05
2007 …… 0.98 …… 0.88 …….. 0.88 …………11.7x ….... $8.33 - $12.96
Final numbers for 2008 are not yet in but annual distributions were $1.47/unit.
The final quarter of 2008 included an extra $0.357338 /unit due to a “true up” adjustment.
The Q1 payout for 2009 was $0.113811.
WTU holders have received total income of $13.24 per unit over the past 9.25 years for an average annual distribution of $1.43. At yesterday’s virtual decade low unit price of $4.05 that would represent a 35.3% average annual income if the coming years provide the same distributions as those of the past.
Even at the first quarter’s depressed level of $0.113811 the current year would bring $0.4552 per unit or 11.24% in current yield. Compare that with your money market or bank CD rate today to see if it might look attractive.
Best of all is the capital gains potential.
Will natural gas prices stay at their present depressed levels or will they pick back up over time? I’m willing to bet they’ll go significantly higher. The actual prices of WTU units have never been cheaper. The 52-week low was hit during yesterday’s trading.
This is not the first time WTU has posted a scary-looking drop in price. Units peaked at $21.99 in 2001 before falling to $5.00 at the depths of the 2002 bear market. Savvy buyers back then watched their units surge to $14.30 in under one year and to $21.95 over the next three years. Plus, they collected $4.35 in total distributions over that 36 months.
A return to even previous actual annual LOW prices would bring exceptional gains while a rebound toward old highs in the $9 - $23 range would provide huge capital gains on top of the substantial current income stream.
Unless you are looking for a total collapse in natural gas pricing WTU units seem to offer the perfect blend of high income, extraordinary upside and low risk.
Disclosure: Author is long WTU units.
