Energy Dividend Stocks: I Hope You Avoided This One!
Energy Dividend Stocks Are Good To Own… Except This One!
I sure hope you heeded my warning…
In November 2014, I told you about an energy dividend stock that naïve investors thought was too good to pass up. At the time, the Whiting USA Trust 1 (WHX) was trading for $2.30 and yielding a massive 67% dividend.
An income investor’s dream- right?
Not so fast.
As I explained, the WHX dividend windfall was just a mirage.
You see, WHX is an oil trust that pays its distribution from net profits interest (NPI). But as the owner of the trust explained in press releases and SEC documents, once NPI runs out, the trust will wind down and shares will drop to zero. (Yes, $0.00!)
But those facts didn’t keep dimwitted investors from buying WHX in late 2014. In fact, the company operating the WHX trust stated in a November 7th, 2014 press release that…
“…trust units are trading at a price substantially in excess of the aggregate distributions that may be reasonable expected to be made prior to the termination of the trust.”
They went on to say in that same press release…
“Consequently the market price of the Trust units will decline to zero around or shortly after the net profits interest termination date, which is currently estimated to occur during the quarterly payment period ending March 31, 2015.”
Believe it or not, investors kept bidding on WHX through December 2014 and early January 2015. In fact, WHX was still trading at a remarkable premium to its remaining distribution as early as last week!
But then the final shoe dropped…
Unfortunately for our knuckleheaded friends who bought WHX for the seemingly super dividend, the trust recently announced the exact termination date for NPI- January 31st, 2015.
That’s right, WHX is going to $0 sooner than expected!
Look at the reaction…
As you can see, WHX plummeted from $1.75 to $0.40 in recent trading- an eye-popping 77% decline in just a few trading days.
And the best part is, shares are guaranteed to go to zero by the middle of February. That’s when the final distribution will likely be paid and the trust is wound down.
Is There A Lesson To Learn Here?
First of all, stick to Commodity Trading Research for commodity and natural resource stock trading knowledge that you can’t get anywhere else.
Secondly, it pays to read press releases and SEC documents on companies you hold in your energy dividend stocks portfolio!
The only way an investor could have not known about the guaranteed price collapse in WHX was if they bought shares for the huge dividend and didn’t do a lick of research.
Folks, whenever a stock pays an unusually large dividend, you should always do some digging to find out why. Nine times out of ten there’s something wrong, or about to go wrong.
To be clear…
Whiting Petroleum (WLL), the company operating the trust, repeatedly announced that WHX was eventually going to be worthless. As a result, WHX was one of the worst energy dividend stocks you could have bought over the past few years.
If you’re looking for good energy dividend stocks to buy, stay tuned. I’ll gathering a list of the top energy dividend stocks to buy in 2015.
You’ll only find it here at Commodity Trading Research!
Until Next Time,
Justin Bennett
Commodity Trading Research
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Natural Resource Stocks
