Taking Stock: Broker's Copano recommendation gets a thumbs up

ODear Mr. Berko: My broker recommended that I buy 700 shares of Copano Energy, a gas Master Limited Partnership. He thinks it can go from the current $23 price to $30 in a year, and that the $2.30 dividend yielding 10 percent makes this stock "easy to hold." Tell me what you think. However, I'm not comfortable taking $15,000 from the safety of money market because Obama's politics and policies on health care, the debt, social security, etc., will ruin the country. This guy is going to pass legislation that could push the U.S. into ruin. And lots of my friends think so, too. TA in Gainesville, Fla. Dear TA: There are lots of folks like you who have their tutus in a tizzy. They strongly dislike Obama and blame him for our huge deficits, our high unemployment rate, problems in our schools, the recession, crashing real estate prices, immigration, Social Security, taxes and even the weather. However, as I discussed in my Private Letter: "Many Americans are using Obama as a scapegoat because of his skin color and his visibility. The blame -- 100 percent of it -- belongs to the 535 members of Congress." In short, the White House does not make immigration laws, Congress does. The White House does not write tax laws, Congress does. The White House did not cause Fannie Mae to lower loan standards and henceforth fail, but Congress did. The White House did not expand the coverage and cost of Medicaid, Congress did. The White House did not write legislation that forced Medicare to overextend itself, but Congress did. And the White House did not write the laws forcing Social Security to be more generous with its benefits, but Congress did. Get this through your thick skull: The culprits are the 535 members of Congress. There's little difference between Congress and a circus midway, which a famous showman succinctly summed up: "A sucker is born every minute P.T. Barnum declared, and a Congressman born every hour to make sure no sucker is spared." Congress is a metastasizing cancer that is turning us into worms by sucking the marrow from our spines. But I really like your broker's Copano (CPNO - $23.25) recommendation. I bought 100 shares for my sister in March of 2005 at $38 and sold it in May of 2007 (after a 2 for 1 stock split) at $42. Some 18 months later, CPNO traded in the $9 to $10 range, and its .575-cent quarterly dividend ($2.30 annually) yielded better than 23 percent. I lacked the courage to buy it then; however, in February, I put 200 shares back in her account at $23, and I'm glad I did. The current yield is 10 percent, and I expect CPNO may increase its dividend a smidgen or two sometime this year. CPNO provides gathering compression, dehydration, treating, transportation, processing, conditioning and fractionation for natural gas producers. Copano owns 6,300 miles of pipeline in Wyoming, Louisiana, Oklahoma and Texas, seven processing plants with more than one billion cubic feet of daily capacity, plus a significant stake in two smaller gas-gathering pipeline companies. Since its IPO at $20 a share in May of 2004, CPNO has grown its revenues from $430 million to $1.3 billion; its book value increased from $4.20 to $17.20; its cash flow grew from $6.3 million to $91.4 million; the dividend rose from 40 cents to $2.30; its share price has more than doubled; and a 2 for 1 split increased the outstanding shares to 55 million. The fundamental outlook for the gas storage and transportation industry is modest. But I expect fee-based pipeline and terminal operators to continue to expand earnings and probably increase capital expenditures. And while gas consumption may be up only a tad in 2010, longer-term prospects are strong. CPNO should double its earnings in 2010 and may even increase its dividend a tick or two. Wells Fargo, Morgan Stanley, Bank of America, Morgan Kegan and Ladenburg Thalman have reports on CPNO with an "outperform" ranking. However, due to market conditions, I think CPNO will trade in the $22 to $25 range this year and should run to the low $30 in 2011. But you can enjoy some good income this year while you wait and enjoy a $2.30 dividend that is 85 percent nontaxable. So take your broker's recommendation on board because it's on track and on the mark. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Mon, Jul 18, 2011