Why Chesapeake Granite Wash Trust's Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chesapeake Granite Wash Trust (NYSE: CHKR  ) fell as much as 14% today after the company announced a distribution to shareholders.

So what: The company said that it would pay a quarterly distribution of $0.6588 per share for the first quarter ending March 31. The distribution was below the $0.74 target the company had set, and shares reacted by declining sharply.

Now what: The sell-off seems to be a bit extreme considering that this was just one quarter and that the sell-off was at one point higher than the 11% miss by the distribution. Lower realized unhedged prices of natural gas were faulted for the miss in the first quarter.

The sharply lower price of oil might also bring future distributions down as well, but we're starting from a high point from a yield standpoint. The stock's 12.3% dividend yield (according to Yahoo! Finance) looks attractive, and even if it comes down some in future quarters, I think the stock can move higher.

Interested in more info on Chesapeake Granite Wash Trust? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (5) | Recommend This Article (8)

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  • Report this Comment On May 11, 2012, at 4:48 PM, soldtooearly2 wrote:

    >>The stock's 12.3% dividend yield (according to Yahoo! Finance)<<

    Travis, you don't REALLY depend on Yahoo! Finance as your accurate source for dividend yield % for any stock do you?

  • Report this Comment On May 11, 2012, at 6:05 PM, gbad00 wrote:

    Well, I guess I was lucky, or maybe thinking clearly for a change. I bought CHKR at $18.99. The $0.6588 dividend (annualized) works out to 13.876% for me. I bought the stock after reading the article by Todd Johnson on Seeking Alpha suggesting it as a great long-term buy, and was not please when he later said he was cashing in because of the price gain (to about $30 at one point). I determined then to hold it for the income. I had thought of stopping myself out at $22, but, no, I still have a capital gain.

    However, I WOULD like to hear any INFORMED opinions as to how closely tied in real, functional, financial terms, CHKR is tied its parent CHK. If CHK ends up in real trouble, how does that impact CHKT materially?

  • Report this Comment On May 11, 2012, at 6:21 PM, dys1 wrote:

    So why did CHKR shares get crushed? I'm still waiting for your answer here. I'm a bagholder who offloaded 2/3rds of a position, I'll tell you why. You have a situation with a parent company who has not come out and cleared the air. There remains little bits and details in half-truths still leaking. I thought the parent company would protect this income stream of a trust. I guess not. Reason being is bad mgmt. Two qtrs. ago, using the UNG as a measurement, prices slid $8 a share while the derivative loss was .824 Mil. Last qtr., UNG prices slid $12 a share while the derivative loss escalated 311% to 2.567 Mil. I think everybody in mgmt. got fat on the hog and fell asleep at the wheel here guys as evidenced by the kneejerk shift to liquids and away from dry gas. I wonder what this would've become with less regulation?

  • Report this Comment On May 11, 2012, at 9:15 PM, TheeMadCatte wrote:

    The reason CHKR fell is because Jim Cramer mentioned it on TV in his Lightning Round Session Thursday evening.

    We all know that "lightning" fast stock advice has the utmost credibility.

    If you know Cramer, you know to accumulate anything he dislikes because historically his advice is always wrong.

  • Report this Comment On May 15, 2012, at 2:27 PM, jclaytonjr wrote:

    I'm in buying CHKR today below $20. The Trust is a separate entity from CHK, and it's hard to believe that CHK's troubles, even bankruptcy, will impact the Trust's share of production income. But the market seems to want nothing to do with anything with Chesapeake in the name. The current yield at 20, annualizing the latest disappointing quarter, is over 13%. And production is supposed to increase, as new wells come on line, etc. Who knows, maybe even nat gas prices will increase. Time will tell, but it seems like a fair speculation.

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