Annual Performance Review of Westlake Chemical Partners LP

This is now our third 'Play of the Week' Annual Review since we started this web site just over a year ago.  My initial intention was to post a new 'Play of the Week' every week for fifty-two weeks, and even though this is not a stock picking web site, I at least try to post articles about reasonably priced securities; which in my opinion have been few and far between this past year.

The whole purpose of the 'Play of the Week' Annual Reviews is to show readers the long-term success of the "Divi-X" System compared to not using the "Divi-X" System.  So, without further delay, let's see how our third 'Play of the Week' investment fared in its first full year of trading in our Annual Review of Westlake Chemical Partners, LP, our third 'Play of the Week' chosen back on February 5th, 2016..

Company Profile

Westlake Chemical Partners (NYSE: WLKP) is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop facilities for the processing of natural gas liquids as well as other qualified assets. Our business and operations are conducted through OpCo, a recently-formed partnership between Westlake Chemical Corporation and Westlake Chemical Partners. Our assets include three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana, with an annual capacity of approximately 3.4 billion pounds and a 200-mile ethylene pipeline.

http://www.wlkpartners.com

 

The Dividend Times: An Introduction to The "Divi-X" System

The Last Year - Westlake Chemical Partners, LP

The Leverage Projection Worksheet

WLKP Leverage Projection Worksheet

WLKP Leverage Projection Worksheet

When I initiated coverage on WLKP, the price was $19.10 a share with a dividend rate of $.308/qtr. which equated to a dividend yield of 6.45%.  In our 'Plays of the Week,' we assume a $10,000 investment but when I originally posted the article we only used 100 shares and since I'll be using charts from that article, I'm going to stick with 100 shares to avoid any confusion.

Anyway, back to our 6.45% yield, along with our other factors, such as, 'Multiplier Pick,' 'PmtPerc,' 'Margin Rate,' etc., we were able to leverage ourselves a handsome 34.94% of our shares, or buy us 34.94 of our 100 share total.

Returns To Date

When we compiled our projections for Westlake Chemical Partners, LP last year, this is what we were expecting:

WLKP Return Scenarios

WLKP Return Scenarios

After our first year, we were expecting a modest outperformance over 'Without Divi-X'  of just over $50.00 ($1,479.45 - $1,429.27) which represented an annual return of 19.64% for our first year compared to 15.02% for 'Without Divi-X.'  That wasn't expecting too much, right?

Well, here we are a year later.  Let's see how we did.

WLKP Return Scenarios 2016

WLKP Return Scenarios 2016

A few things to note about this chart:

  1. Right out of the gate, going back to Feb. 2016, "Divi-X" and 'Without Divi-X" started to exceed our 'Expected Return' rate of 9% annually.
  2. "Divi-X" (green line) pretty much took the lead right from the start and has remained there so far.
  3. 'Without Divi-X' (purple line) has a bit of catching up to do if it hopes to keep pace with "Divi-X."  I wish I could say that won't happen but these small cap stocks tend to be a little more volatile than the higher volume large caps most people are familiar with.  One bad headline (depending on how bad) and the lead could easily change.

Translation in Percentages

WLKP Return Percentages

WLKP Return Percentages

The blue line represents share price performance.  The purple line represents 'Without 'Divi-X' and is basically share price performance plus dividends received (not reinvested).  As you can see, "Divi-X" (green line) has taken a commanding lead over 'Without 'Divi-X' to close out Year 1.  A full 16.14% lead to be exact (53.55% less 37.41%).  On a $10,000 investment, such as in our 'Play of the Week,' that equates to an additional $1,614.00 more than 'Without 'Divi-X' in just our first year!

Dividend Yields


Now, for a look at our dividend picture.

WLKP 20YR Dividend Projections

WLKP 20YR Dividend Projections

A few things to note about this chart:

  1. You shouldn't expect anything to impressive on the dividend picture in the first two to three years of holding a position.  Immediately, in our first year, "Divi-X" does hold a 0.02% yield advantage but the true power of "Divi-X" greatly increases yields over time as companies continue to raise their dividends, which WLKP is currently committed to doing (represented by purple).
  2. Even if they don't continue to raise dividends, simply by default (represented by green), "Divi-X" will widen the yield gap over 'Without 'Divi-X.'

If you are reading this article and scratching your head, it's because you haven't learned our very simple system.
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Running Leverage Rate

The "Divi-X" System Workbook monitors one's 'Running Leverage Rate' to keep the user aware of if and when a deteriorating share price increases an investor's risk level beyond their acceptable risk tolerance level.

WLKP Running Leverage Ratio

WLKP Running Leverage Ratio

A few things to note about this chart:

  1. Our initial leverage position started at 34.94%.
  2. Notice the steady decline over time in the 'Loan Balance.'  Ideally, you will want the 'Levered Percentage' trend line to decline at a faster pace than the trend line for the 'Loan Balance.'  The faster the decline, the bigger your winner.  If your 'Leverage Percentage'  lingers around your original 'Leverage Percentage,' it is no cause for alarm but if it continues to do so, you could very well be holding an underperformer.  Should your 'Leverage Percentage' start to go up, put yourself on alert for a potential sell, depending on your risk tolerance and your faith in the stock you're holding.
  3. Because the share price popped a bit immediately after buying at $19.10, you see an immediate dip in the 'Running Leverage Rate' or 'Levered Percentage' to 33.57% from 34.94%.  That's because the increase in market value reduced the percentage ratio of debt to market value.
  4. As of February 2017, our 'Running Leverage Rate' stood at 23.34%.  A decrease of 11.6% from where we started at a year ago.  That is fantastic progress for our first year.

 

 

Conclusion

WLKP Leverage Summary 2016

WLKP Leverage Summary 2016

Okay, so let's recap:

  1. Initially, based on our 'Leverage Projection Worksheet,' we were hoping for a 19.64% return.
  2. After our first year, "Divi-X" did extremely well, surpassing our expectations by a beautiful 33.91%!
  3. Our 53.55% return has already exceeded our 2YR projections of 41.90% by 11.65%.  There is always the chance for a pullback and you should not be surprised if that were to happen but you now have a built-in 11.65% cushion toward next years performance.
  4. "Divi-X" kind of takes a "What have you done for me lately?" approach.  Despite the remarkable performance thus far, "Divi-X" continues to add on your 'Expected Return' rate to any new gains.  Our new target is now 78.99% after YR2 instead of our initial expectations of 41.90%.  That target number will fluctuate throughout the year as the share price and dividend amount changes, but it is really our hope that after YR2, we have exceeded our original projection of 41.90%.

So much for Westlake Chemical Partners, LP for this year.  We're putting this one back on the shelf and we'll revisit it again next February.  Till then, many happy returns.

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Authored by Lee Carroll Wentker

All screen captures are taken from 'The "Divi-X" System Workbook'

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The security showcased here is for learning purposes only. It is not a recommendation or an endorsement of any kind. Do your own due diligence before making any investment.

All work is copyrighted by The Dividend Times, LLC 2015 - 2017

 

 

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