Dear Mr. Berko:
Last May, when visiting with some family in Wisconsin, I shopped at a SuperAmerica convenience store and I was surprised when the owner (he said he was a franchisee) told me that his store was part of a very large chain. He has owned his store for two years, makes a good living and told me the company that owns the Super-America brand name is called National Tier Energy. He said that this company also owns a big bakery that made the excellent Danish I had just finished eating. He told me that National Tier Energy also owns the oil refinery that produces the gas he sells, and he also makes money from gasoline sales. He said he owns 150 shares of the stock that pays a 20 percent dividend. What can you tell me about this company? Would it be a good investment and is the dividend safe?
B.H., Syracuse, N.Y.
I had to grab the bull by the tail and look it in the eye because Northern Tier Energy LP (NTI-$25.95) is really a horse of a different feather. My confusing opinion of this multibillion-dollar- revenue company was a hard blow to swallow. In fact, I was so surprised that you could have knocked me over with a fender. Merrill Lynch, Deutsche Bank, Goldman Sachs, Credit Suisse, UBS, Barclays, JP Morgan along with Citigroup recently took this uncommon conglomeration public at $26.28 with a dividend of $5.08 sporting a current yield of 19.6 percent. Good gosh, the last time I recall rates that high was 1979 when U.S. money market funds temporarily touched 21 percent. Those were the good old days, but let’s not get sidetracked onto a tangent.
NTI operates 169 retail convenience stores and supports 71 franchised convenience stores in charming, rustic towns like Andover, Woodbury, Roseville and Beloit spread throughout the states of Minnesota and Wisconsin. Averaging about 2,000 square feet of selling space, these convenience stores sell tobacco, hot coffee, sandwiches, beer, prepared foods, packaged items, snacks, beverages, candies, chips, tampons and other stuff under the SuperAmerica marquee. NTI also owns and operates SuperMom’s Bakeries that had unpleasant troubles with the Teamsters last year. Supermom’s Bakeries is a huge 31,000-square-foot plant in St. Paul, from which wafts the delightful smells of fresh baked goodies such as doughnuts, cakes, muffins, cookies, jellyrolls, Danishes and other prepared vittles that NTI sells to its 240 units and various third-party retailers.
And along with NTI’s convenience store and bakery operation happens to be an 81,500-barrel-per-day refinery located in the Twin Cities, which was previously owned by Marathon Oil. This includes a 17-percent interest in Minnesota Pipeline Co. LLC, operating a 455,000-bpd pipeline system that moves crude, primarily from Western Canada and North Dakota, over 300 miles to NTI’s St. Paul refinery. NTI operates as an independent, downstream energy company with well-managed refining, retail and pipeline operations. NTI’s refining business produces and markets gasoline, diesel, jet fuel and asphalt to resellers and consumers. The company also owns storage and transportations assets, light and heavy product terminals, storage tanks, plus rail and dock facilities. And of course, every NTI convenience store earns a few extra pennies from every gallon of fuel sold at its pumps.
This is a master limited partnership with 91 million shares outstanding and trailing 12-month revenues of $4.5 billion. NTI reported trailing 12 month gross profits of $816 million and earnings of $424 million before interest, taxes, depreciation and amortization from which it distributed its huge dividend, none of which was subject to federal taxes. Though revenues were up 12 percent from a year ago, I’m unable to put my imprimatur on this issue as a long-term, serious investment. Some observers suggest that the current dividend may continue or even move higher, and that the value of the shares may rise. However, I only recommend this issue as a rank but outrageously fascinating, long-term speculation.