Investments

(Not So) Light Reading

You see that gigantic stack of papers in the photo? That’s the latest SEC filings for BlueKnight Energy Partners, one of the dividend companies I’ve invested in.

That stack of papers is close to 300 pages of legalese, deliberately designed to be completely incomprehensible to the average person.

I have to don a business suit just to get the words to appear on the pages.

I’m kidding. But sometimes I wonder if it would help. As it is, I feel like I deserve a Dunce cap as I wade through this stuff and try to understand it.

A college education in law or finance would probably help but guess what? I don’t have either of those pretty feathers to stick in my cap…

…But that’s not going to stop me. I will read this stuff, and keep reading it, until the day the light begins to glow in my uneducated, poverty-riddled Hillbilly brain and I figure out what on God’s Green Earth they’re talking about.

Pieces of it I can understand already. This little company is designed to generate cash distributions for its stockholders in the Energy industry. It does stuff with asphalt and is a one-stop shop for oil well owners who want to transport their crude oil to refineries, regardless of how far away they are from the pipelines. BlueKnight sends in the tanker trucks, hauls it to their storage and pipeline areas, then works their particular magic with the stuff to send it down the line.

They also posted a major loss this past quarter and had their partner pull out of a pipeline project called the Cimarron Express. As a result, investors have fled from this company like rats from a sinking ship. At the close of day Friday that little company was trading for a measly $1.06 a share.

That price translates into a 32% dividend return, which is the reason I’ve spent the past few days wading through a stack of legalese that’s so obtuse a Geometry teacher couldn’t understand it.

I’ve got about $250 to invest this round. I’d initially planned to purchase more Valeritas shares but that dividend return is calling to me. They dropped their dividend rate a while back before the Cimarron Express was a thing. From what I can determine, they intend to keep their current distribution rate over the next year regardless. As a result, their dividend is relatively safe over the next year. Even the expert analysis my brokerage sends me agrees on that.

If I’m right, the reason that they posted a loss wasn’t that the company actually lost money but because they took what is known as a writedown on their assets that only made them look like they lost money. It’s a common trick businesspeople use to lower the taxes they pay. That was how they explained it in their conference call a few days ago; I just want to see it in writing before I put my money where my mouth is.

I may be crazy, but I’m not completely stupid. I don’t expect the price on this stock to go up much over the next year but at that price the dividend return would compensate for that.

It would also take me a tiny bit closer to achieving financial freedom.

For now I need a break. I’ve read this stuff until my eyes have glazed over so I’ve set it aside. I’m going to hang up this last load of laundry, soak in the tub for a bit, and call it a night.

Tomorrow marks the first official day of my management training. Next week will be filled with that and the mixed blessing of the kid arriving home from the Navy.

I’m dreading tomorrow. I’m going to miss my cashier’s smock.

2 Comments

  • Sam Hagins

    L.P. (Limited Partnerships) can be tricky on how their dividends are taxed. Part of the dividend may be taxed at a higher rate than standard dividend rate, depending on where they get the money to pay that dividend. They are ok in a taxable account, not so much in a tax-deferred account.

    • Annie

      Thanks for the tip, Sam! I decided against using a tax-deferred account when I started this project; I wanted to have the ability to use my growing dividends to survive in the event of a financial challenge, as well as to be able to pull out capital gains when I’m ready to get started in real estate. The penalties attached to early withdrawal on tax-deferred accounts just didn’t seem to mesh with my long-term goals as a result.

      Your tip about L.P. dividends shows me that I was right in making that decision. Thank you!