November 2007 Passive Income Update
I’m busy getting ready for my upcoming trip and also my business school applications so I’ll have to keep this short.
My passive income for November was $1,679.88. As expected it was slightly lower than last month. But some of the shortfall was made up by the purchase of some dividend generating stock in AAV and HTE in October. I also received a special 30% payout from the Korea fund, but I’m not counting that. I’m just counting the regular $13.00 dividend that it paid out.
Here’s a basic break down:
My online income also includes the $50 I received from Prosper.com referrals (sign up and get $25 free with a $50 deposit). It doesn’t include the interest I get from my Prosper loans but thats over $50 a month.
Adsense earning were up this month 36% to $262.50. I’m sure if I tweak the ad placement a little bit I can boost these earnings.
How was your passive income?
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December 9th, 2007 at 7:31 pm
Congrats on your passive income numbers! I’ve got a while to go before I reach that myself. As an investor in canroys myself, I’ve learned that it is important to pick stocks that don’t cut their dividends. The yield of hte and aav might be attractive but you’ll lose a heck of a lot more capital than gain from the yield if they end up cutting their dividends. Those two in particular (hte, aav), have a history of cutting dividends, especially in a high oil price environment and would NOT recommend them at all.
Another factor to consider is how much of their revenue comes from oil vs gas. AAV and HTE earn a significant portion of their revenue from gas, which is not controlled like oil is by OPEC. A better canroy play would be cpg.un, close to 90% oil and hasn’t cut its dividend.
December 10th, 2007 at 12:43 am
Deez,
Thanks for your input on Canroys. Where do you get your information about AAV having a history of cutting dividends in a high oil price environment?
Looking at morningstar site:
http://quicktake.morningstar.com/stocknet/StockReturns.aspx?Country=USA&Symbol=AAV&pgid=qtqnlinkretn
AAV’s dividend has steadily increased in 2007 from 0.1279 – to 0.1515. And 2007 can certainly be classified as a high oil price environment – is it not?
Thanks ahead for any info,
December 10th, 2007 at 1:06 am
Deez,
thanks for your comments. Your concerns are quite valid.
However, I’d like to counter with 2 points.
AAV invests mostly in Natural Gas. NG prices have been quite depressed lately.
All the NG wells in the US are working at full capacity and there have been hundreds of wells brought on line this year. But the output has pretty much remained the same. Thats a good reason to believe peaked with our NG production. Any disruption in supplies could cause a spike in prices, which is good for holders of NG canroys.
Also, just because the company cuts the dividend, doesn’t mean its making a loss or making less profit. Its using the dividends to re-invest in increasing the depleting reserves. This is good in the long-term. A reinvestment in the business is always good.
Another bonus point, is that Abu Dhabi’s utility company just spent $5 Billion on an NG canroy. Believe me, a country with 1.6 million people doesn’t need $5 Billion worth of NG. It bought it as an investment and because it thinks the prices are going higher!
as far as HTE is concerned, its invested in a refinery. I find that sort of vertical integration appealing. It has temporarily cut the dividend for 1 quarter and the money is being reinvested in the company.
Typically oil/NG producers hedge their production out 6 months, so the spike in oil prices we saw in the later half of 2007, may not have been a windfall for many canroys. Hopefully oil prices will stay high so they can benefit from this.
December 10th, 2007 at 5:22 am
LOD,
You are right about HTE’s refinery, it definitely provides stability in terms of cash flow. After it cut its dividend however, the stock price dropped around 30%. If the price stays constant it’ll take a couple years to recover that lost capital. NG prices did go very high a couple years ago but then they dropped to what they are now. Back then every NG producer out there pumped to capacity. IMO, without an OPEC for NG, I just don’t think prices of NG can be maintained for significant periods.
Pavel:
I believe the distribution increases shown on the morningstar website are essentially increases due to the exchange rate. If you look at its distributions in canadian dollars:
http://finance.yahoo.com/q/hp?s=AVN-UN.TO&a=07&b=13&c=1996&d=11&e=10&f=2007&g=v
you’ll see that it hasn’t increased dividends since april 2005. Before that date they raised dividends by the year end so the external management could get bonuses if they raised stock price a certain amount.
Another metric used for trusts is production per 000 units outstanding. AAV in that sense is terrible, it has been diluting its units quite a bit, it is also a reflection on the management.
Anyways just my 2c, I’d much rather prefer conservatively managed canroys who don’t cut dividends and increase production from cash flow rather than by selling more units.
December 10th, 2007 at 7:02 pm
Great to see a break down on passive income. Thanks for sharing. I had never thought of doing this but you have inspired me. I enjoy your site. Keep up the good work and good luck with business school. I just finished up my MBA last August.
December 11th, 2007 at 2:45 pm
Good stuff. I need more passive income, though I am not sure if I don’t like lump sums. If my house doesn’t sale I will be renting…
December 15th, 2007 at 5:32 am
For holders of AAV: http://biz.yahoo.com/cnw/071214/advantage_energy_08.html?.v=1
Distribution cut to 0.12/unit starting this month, more of a result of unit dilution (see mention of production (BOE) per unit in my post above).
IMO these types of royalty trusts should not be out there, I’d recommend doing your DD before investing rather than simply buying them for their yield. There are much better managed royalty trusts.