2024 Year in Review Part III: Income and Quality: $MPW, $JXN, $JOE, $CLCO, $HOEGF, $CRESY, $EC, $NE, $VET, $METCB, $ARLP, $BSM

For the last article, I owe you 4 pushups and 19 sit ups. I do understand if paywalled articles don’t get as much traction. As a quick reminder, for the month of January, I will do 1 pushup for every restack and 1 sit up for every like that each writeup receives. If the combined number of likes and restacks reaches certain milestones, it will create a narrowing window of intermittent fasting.

It’s that time of year, time to help my wife invest her annual Roth IRA contribution. Once upon a time I was a financial advisor with Merrill Lynch, so I might as well dust off my old normie retirement account management tool kit.

My better half has a much lower risk tolerance than I do, and I also don’t want to bother her to move around positions more than once a year, she is busy with her career and our two kids. So for those few quality and income names that I have been keeping an eye on, this is their time to shine.

On a less important metric, I do try and pick companies that could do alright unattended for many years. If I were to suffer some sort of tragic accident, it is very likely that my wife would neglect the account, probably until she reached her 60’s and started thinking about retirement. I met too many people in that situation as a financial advisor.

Medical Properties Trust (MPW):

My very first article was about Medical Properties Trust (MPW), and I have been very patiently waiting for the overhang of bad news to finally play out. The stock is still mired in drama with two debt maturities to refinance this year, and one tenant still going through bankruptcy. At this price the current dividend yield is 8%, but funds from operations last quarter were double that, a debt covenant is restricting greater dividends until September of this year. I can’t promise that there won’t be any more bad news, but I am still bullish. I bought some MPW for my wife’s Roth IRA last year, however, so I don’t want to add any more at this time. While I might run a concentrated portfolio for myself, I follow all the rules for my wife.

Jackson Financial (JXN):

I was prudent enough to buy a big chunk of Jackson Financial for my wife’s Roth IRA last year at around $35 a share. The dividend yield isn’t amazing after the price runup, but at her cost basis it is very decent, and the share buyback program is aggressive. With the recent pullback in value names, JXN is worth another look for all investors, but with the price action, my wife is already too concentrated here to buy more.

The St. Joe Company (JOE):

I think the St. Joe Company (JOE) is a solid choice for the Roth IRA this year. With the recent price pullback, Joe is very attractive here. I usually look for a higher dividend yield than JOE provides, but the dividends are automatically reinvested anyway, so the income preference is mostly so I can show my wife what happened over the course of the year in her account and she can feel like things are making progress. JOE is making progress under the surface with all the construction they’ve undertaken this year, the real estate is grossly undervalued, and I have a strong suspicion that interest rates will be falling soon. Of course none of the short term thinking matters much, my wife is 32, and I’m trying to buy companies that can be held for the next thirty years, even though in a retirement account positions can be changed without triggering capital gains.

Shipping: Cool Company (CLCO) or Hoegh Autoliners (HOEGF)?

Cool Company (CLCO) did cut their dividend, but they also initiated a share buyback program. It is still technically a failure from my “Probably Not a Value Trap” series as they did cut the dividend. But with the recent price crash, it’s still interesting here. I’m not sure it’s the right shipping stock for an account that I won’t be checking in on frequently. But the narrative on natural gas just went from bearish to bullish on a dime, and the stock has more room to run in the short term. CLCO is probably a better short term trade, and that is not the purpose of the account.

On reflection, Hoegh Autoliners is my number one choice for the Roth this year, if and only if my wife’s bank allows the purchase. In my own account I bought HAUTO.OL on the Oslo exchange, and I haven’t attempted to purchase shares under the HOEGF ticker. It has very little volume, and it trades on the OTC or pink sheets. But if I can place the trade on a domestic exchange, this is what I’ll stuff my wife’s Roth IRA this year. The fixed contracts and the return of capital to shareholders are what really seals the deal for me.

International: El Cresud (CRESY) or Ecopetrol (EC)?

With the recent pullback in CRESY’s price, I might be tempted to buy a bit in my wife’s Roth IRA. The variable dividends are the biggest drawback. I have a lot of optimism for Argentina with Milei, but I am not convinced South America will ever be a place where I can just buy a stock and forget about it for a few decades.

Regarding Ecopetrol, after two terrible years for energy, prices are way down, and things are looking up. Again, the variable dividend is not ideal, but there are really good odds of an improving governance situation in Colombia after the 2026 elections. As a stock that isn’t monitored, with dividend reinvestment turned on, there probably will come a time when the prudent thing to do is to liquidate the position. Every South American country is always just one election away from ruining everything. I really like the price and the prospects for at least the next five years, however.

Noble (NE):

While I haven’t written about Noble (NE) specifically, I own Transocean (RIG) for my portfolio, but Noble is the quality and income name for the offshore deepwater space. With little debt, a trailing 12 month price to earnings ratio of 9.65, a 5.55% trailing 12 month dividend, and an aggressive share buyback program. This is a solid contender for an addition into my wife’s Roth IRA this year. The offshore thesis is still solid, although frustration has mounted with a bit of delay in the momentum over the last 18 months. With 2026 offshore spending projected to soar, many of those contracts could start landing in the summer of 2025.

Vermilion Energy (VET):

With a recent dividend increase, as well as the recent share buyback behavior, I am as surprised as you are that Vermilion Energy (VET) is under consideration for my wife's Roth IRA. The dividend of 0.52 CAD when adjusted for the current share price is a yield of about 3.5%, which isn’t amazing, but with attention to share buybacks, VET could be a solid dividend grower over time. I don’t have confirmation on this yet, but some back of the envelope calculations makes me think the share buyback was enough this past quarter to retire more than 3% of the float. A share buyback in combination with a dirt cheap share price is quite a combination, and it creates an unsustainable situation where the most likely outcome is higher share price. I’m going to have to reflect on it a bit more, but the timing seems pretty good here.

Ramaco Resources B Shares (METCB):

When I originally wrote about Ramaco Resources (METC), I didn’t spend much time discussing the B shares, METCB, which are set up to be more like a royalty. I’m not as enthusiastic about royalties as my friend Ben Demase from The ROI Club, but before they are discovered and bid up, they can be a value stock for a brief window. I believe METCB fits into that category, an underpriced royalty which gives it a strong yield at this price. The market didn’t really know what to make of the in-kind dividend when METC shareholders were granted METCB shares, but the founder and CEO is a finance professional, and he knows that sometimes a thinly traded security needs enough volume for liquidity, and I believe this was the reason for the issuance. At some point the METCB shares should rerate so that the dividend yield is as sad and small as other royalty companies, but prior to the rerating METCB is all three, value, quality, and income. I do plan on adding some METCB with this year's Roth IRA contribution.

Energy Limited Partnerships: Alliance Resource Partners (ARLP) or Black Stone Minerals (BSM)?

Most of the successes from my “Probably Not a Value Trap” series are the master limited partnerships, MLPs, however, there are tax consequences to owning MLPs in a retirement account. More than $1,000 of annual MLP income is the threshold before one has to pay taxes on the distributions, and for ARLP or BSM that would mean a position of around $10,000. If I really wanted to buy some, there is still room for a few MLPs in the account, but it’s an annoying little detail that at some point I will forget. So I will probably pass on all the limited partnership names for the Roth IRA.

Just reviewing the companies, Black Stone Minerals remains remarkably range bound despite the enormous land purchase from when Shell exited North America. On this new drilling cycle, we might finally see the increase in production volumes that will cause BSM to break out of its enormous channel. ARLP, however, has been grinding higher like a champion, the Permian income is offsetting the slow thermal coal market. I like them both, just not in a Roth IRA.

Conclusion:

In rank order, this year’s Roth IRA contribution purchase is going to be split between:

1. Hoegh Autoliners

2. Ramaco Resources B shares

3. St Joe Company

4. Noble

5. Vermilion

These choices are a little heavy on energy when considered in isolation, but in the context of the contributions from the last five years, they will provide a well balanced portfolio. The larger past positions include Medical Properties Trust and Jackson Financial, so I am not eager to add more financials or more land. Of course I would like to add a gold miner, but I don’t have a quality income name for that sector, the prices are just never that cheap, and while I love Sibanye Stillwater, the dividend has been suspended. The same is true for technology, income is especially hard to find in technology, and quality can only last as long as technological obsolescence.

The Roth IRA does have a mix of ETFs, Closed End Funds, and even a few individual bonds to anchor the volatility. My wife doesn’t check her account balance frequently, but if the volatility were really outrageous, she might just notice.

If this were not a tax sheltered account, Black Stone Minerals and Alliance Resource Partners are very attractive. And if this were a more actively monitored account, I really like Ecopetrol and El Cresud. Aside from the dividend cut for Cool Company, the other “Probably Not a Value Trap” names have held up alright, even as some of their prices have fallen, the dividends are stable for now.