• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

Miller Energy's Preferred Treatment

When declaring a dividend, it's all in the timing.
By JIM COLLINS
Feb 02, 2015 | 08:00 AM EST
Stocks quotes in this article: MILL

At times I think this market is certifiably insane, and it just keeps getting weirder out there. Other times I think it makes perfect sense. Timing is important, and can produce returns that are ridiculous. It also requires a completely different way of seeing, as securities that should be safe havens become pop-and-drop trading vehicles.

I've written about Miller Energy (MILL) several times before on Real Money, and with Miller's preferred shares languishing at 35-40 cents on the dollar earlier this week, I wanted to know when the company would declare the next dividend on its 10.75% Series C preferreds and 10.5% Series D preferreds. I know the next payment is due March 1, but with a strong chance of insolvency clearly being priced into Miller's preferreds, I reckoned that the mere declaration of a dividend would inject some confidence into the company's preferred shares.

I'd like to say that divining when Miller would declare, if the board of directors so chose, its next dividend required many hours of reading its public documents, visiting the company's facilities in the Cook Inlet of Alaska and studying its assets. I have done all those things, but guessing MILL's next dividend announcement actually only required one tool: Google. I simply searched the Web for Miller's preferred dividend declarations, and the hits showed me Miller has always announced the preferred dividends on the last day of the respective fiscal quarter (Miller's fiscal year ends April 30). So Friday was the day for that, and with the Series C preferred trading at a whopping $9.90 Thursday afternoon (under 40 cents on the dollar), I figured I would buy some in hopes of a press-release-inspired rally.

Well, Miller's board -- as they have done every quarter prior -- declared the preferred dividends Friday at 8 a.m. ET, and the market reacted. By the end of the day's trading, Miller's Series D preferreds had gained 20.6% and the Series C had risen 20.1%. It didn't hurt that crude had its best performance in two years, but even in the morning, when crude was still fighting to regain $45 a barrel, both Miller's preferred series were steadily rising, trade by trade.

So, let's just take a step back and think about this activity. Miller's preferreds rocketed because its board declared -- not paid, mind you, but declared -- a payment on a fixed income class. This after Miller CEO Carl Giesler stated on the company's last conference call in December that paying preferred dividends was "sacrosanct" to Miller's board.

Well, some in the market obviously didn't believe him, and boy were they wrong. It's just amazing how low the bar has been set for these E&P companies, and let me tell you, watching a short-covering bounce-back rally unfold is a thing of beauty. If one is long!

No one is declaring victory after one preferred dividend payment, and obviously the market's focus should be on Miller's ability to make those payments in the future. I am meeting privately with Giesler at next week's IPAA OGIS conference in Florida, and he and I will go through the factors impacting Miller's creditworthiness in a sub-$50/barrel oil world in excruciating detail, I am quite certain.

Even after Friday's massive move, the Series C and Series D are yielding 21.1% and 23.8%, respectively. The company's hedge book and tax credits receivable from the state of Alaska bolster their ability to make payments going forward, but obviously their Cook Inlet assets are higher-cost in a world where "uneconomic" is the buzzword in the energy industry.

But, on a day like today, that doesn't matter as much. Twenty-percent one-day moves tend to ease the desire to run credit numbers on a Friday night, and with that gain in hand, it removes the pressure to sell right away, or sell before the Feb. 13 record date of the dividends, which will add -- other things being equal -- a capital return of 5% to 6% to the capital appreciation already recorded. A nice way to start the weekend!

Please note that due to factors including low market capitalization and/or insufficient public float, we consider MILL to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins was long Miller Energy Series C and Series D preferred, although positions may change at any time.

TAGS: Investing | U.S. Equity | Energy

More from Energy

Saudi Arabia Has Only One Objective: Higher Oil Prices at Any Cost!

Maleeha Bengali
Mar 5, 2021 10:00 AM EST

For now, they have achieved their objective, showing President Biden firmly who is in charge.

Listen to Mr. Market, Not Mr. Powell

Jim Collins
Mar 4, 2021 1:56 PM EST

Let's look at bonds, rates and, especially, inflation for a true picture of what's going on, and where to put your money.

Jim Cramer: There's No Stopping the Electric Gold Rush

Jim Cramer
Mar 2, 2021 7:10 AM EST

You can't lip service electric vehicles anymore. Exxon's board moves indicate it knows its gasoline days are numbered.

Is Chevron Finally Ready to Make an Upside Breakout?

Bruce Kamich
Mar 1, 2021 1:44 PM EST

Let's check out some charts on the energy giant.

No Longer an 'Aristocrat,' This Dividend Stock Still Looks Pumped

Bob Ciura
Feb 25, 2021 2:30 PM EST

Suncor Energy has a bruised but energizing 3.0% yield.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:38 AM EST GARY BERMAN

    The INDU and DIA

    FIBOCALL: The INDU index and the DIA The INDU ...
  • 10:44 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Challenge of Short-Selling"
  • 08:40 AM EST PAUL PRICE

    Recent Pick SpartanNash (SPTN) Raised Its Quarterly Payout by 3.9%

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login