Why I Sold BP Prudhoe Bay Royalty Trust (BPT) and Replaced It

I went to work, took care of some calls and emails, talked to staff briefly and dug in for some research. The first thing I did was to take a look at MSN’s Stockscouter. I looked at stocks rated 10 and then screened for dividend yield. The stock that jumped out at me was National Resource Partners. I looked at the quote; it was sitting at $22.24 paying a dividend of $2.20 per year about 10%. It was sitting right in the middle of its 52 week high and low ($28.22 and $16.90). Not too hot and not too cold. P/E a little high at 17 forward P/E is 11.5. Earnings were less than the dividend. I then read that assets consumed are written off to lower tax, making earning look lower than the cash available to make payouts to investors. My gut told me this was it.

But then I read the company profile and I was disgusted, but excited. They own mineral rights to coal bearing lands, cringe… but wait, they are diversifying and they got my attention with the word “trona.” I had been doing research on Rio Tinto plc (NYSE:RIO) the week before and found they had bought US Borax in the Mojave with the trona works in Owens Valley. What the hell is trona? Turns out it‘s soda ash, and it’s a key ingredient in the glass making and paper making processes, and baking soda is also made from it. This stuff is an important industrial commodity, and it’s in short supply.

Well, I thought maybe I would buy NRP if it was at $22.00. I checked the price and it was at $22.14. I told myself, take it slow, do more research. It goes ex-dividend February 5 paying $.55 on the 14 and it has risen 20% since the fiscal cliff deal. So, I thought okay, if I am going to buy this before ex-dividend it has to be at a discount equal to the dividend on the current price. I went back to business and checked the price an hour later; it had bottomed at $21.60. Then, it was back up to $21.72, this was a sign, so I moved on it. I bought my shares at market. Executed immediately at $22.74. It began to fall again. I was back at the craps table. I was being moved by fear and greed, but my gut said it was a good move.

Friday, I woke to NRP at $22.38. I am still doing research on the stock, but I like it. It was a gut reaction and it seems like the right choice. Yeah, I’m okay with the gut…

The article Why I Sold This Trust and Replaced It originally appeared on Fool.com and is written by James Coffman.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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