NGL Preferred C: Wary Due To Persistent High Risk, Sell

An analysis warns against NGL Energy Partners Preferred C (NGL.PR.C), citing a concerning three-year downward trend in cash flow, high debt, and a low common stock price that collectively question the sustainability of its preferred dividends, despite recent arrears repayment. The persistent financial stress makes its preferred shares high-risk, with investment-grade Western Midstream Partners Common suggested as a safer alternative offering a growing distribution.

Analysis

NGL Energy Partners Preferred C (NGL.PR.C) exhibits a high-risk profile characterized by persistent financial stress. Key indicators of concern include a consistent downward trend in cash flow over the last three years, with no recent evidence of a reversal. This is exacerbated by a high debt load and a low common stock price, which collectively signal underlying financial instability. While the company recently cleared its dividends in arrears, the analysis posits that the sustainability of future preferred payments is questionable without a clear operational turnaround or material improvement in cash flow generation. As a point of comparison, the article highlights Western Midstream Partners Common (WES) as a safer, investment-grade alternative that offers a growing distribution, suggesting a more favorable risk-reward profile for income-focused investors despite a slightly lower yield.

Key Decisions for Investors

• Investors holding NGL.PR.C should reassess their position due to the significant risk to dividend sustainability posed by declining cash flows and high corporate debt.
• For income-oriented portfolios, it may be prudent to evaluate shifting capital from NGL.PR.C to what the analysis presents as safer, investment-grade alternatives like Western Midstream Partners, which offers a growing distribution.
• A potential re-entry or new position in NGL.PR.C should be conditioned on concrete evidence of an operational turnaround and sustained positive cash flow growth, as the current fundamentals do not support its risk profile.