George A.: ‘As hesitant as I am to correct you (and I could be mistaken), but it appears that CPNO is paying out more than it’s making. According to Yahoo Finance, it’s earning less than its dividend.’

☞ Good point. But there’s ‘earnings’ and there’s ‘cash flow.’ Earnings are reduced by bookkeeping entries like depreciation and amortization that require no cash. So one thing to note, as per the company’s recent press release: ‘Second quarter 2008 distributable cash flow represents 160% coverage of the second quarter 2008 distribution of $0.56 per unit.’ (Here is the company’s description of its distribution policy.) You may rightly say, ‘Well, if it doesn’t set aside cash to cover depreciation, what will the company do when the pipeline needs to be replaced?’ I think the answer is that if you maintain a pipeline properly, it should last a long, long time.

In fact, most pipeline stocks work this way (PAA earned $1.82 and pays out $3.55; TPP earned $1.86 and pays out $2.84) . . . as do most REITs (real estate investment trusts). I suggested BFS eight years ago at $16 when it was paying a 9.6% annual distribution ($1.56 a share) – which was more than its reported earnings. Today, at $46 or so, I don’t own it anymore, but I note that the distribution has risen to $1.88 (which works out, on a $46 share price, to a fairly modest 4% return), even as earnings were only $1.62.

None of this guarantees success for CPNO, of course. But so long as you avoid ovoid monolithicity, I think it’s a reasonable investment.


Joel Grow: ‘Stevenson, when told he’d given a speech that would ‘win him the vote of every thinking man in America,’ replied ‘not good enough.’ And he was right. Americans vote, even when it’s against their own best interest, for ‘regular guy’ types, or at least those who ACT like regular guys. That’s not the smallest of many reasons Biden would be a fine VP choice for Obama.’

John Kasley: ‘Obama allows reporters to recite whole GOP claims and then refutes them, which is overly gracious – and gives full voice to the false claim yet one more time to a million viewers. Obama should interrupt reporters with a raised hand – like a stop sign – and start talking before the reporter completes that little recitative to make his (Obama’s) own statement. (Up there on Obama’s high road, there’s no shortage of things to say.) In a courtroom one would object and then quickly think of some reason for the objection as you rise to your feet. The point is the interruption of the opponent’s rhythm and speech before the message makes its impact on the jury. The objection gets the attention of the jury and the original message is diluted even if the objection is overruled. If a persistent reporter wants to hammer home a point, it’s fair to say, ‘We really covered this pretty thoroughly last Tuesday, I believe. If not, contact my staff for clarification.’ . . . or . . . ‘What part of what I said last Tuesday seems unclear to you?’ It also lets a reporter know that this is not all about the reporter as media star.’

☞ John goes on to suggest that Obama might mention a few hundred times that most corporations pay no income tax – (‘Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress . . .‘) – even as Senator McCain is proposing to lower it for them.


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