For Newbie Investors Only: MDU

Update: a couple hours after posting the note below, I went back and looked at the dividend history. I "knew" what MDU's dividend history was but looking at it on the Yahoo!Financial charts really tells a story. Even when the market imploded in the summer/autumn of 2008, and again in March, 2009 (great buying opportunities by the way), MDU never missed a dividend and continued with their usual practice of increasing dividends. I have to admit, MDU is very, very enticing: a) in past two years, the share price of MDU has had a steady climb going into December (heating bills in the northern tier); b) Fidelity is getting back into looking for oil in the Bakken; c) the last time the dividend was raised was a year ago at this time (paid in December); d) if share price rises, dividend will have to be increased to maintain reasonable yield for a utility; and, e) once MDU starts moving, it could move quickly to $23 or $24 -- not a lot in raw numbers but more than 10% upward movement, with little downside risk.

MDU will announce earnings on October 26, 2010. It's very possible that if there is going to be a pop in MDU's share price it will happen after that announcement. I expect that their outlook will be positive; a lot of negatives are behind them. (A lot of those negatives couldn't get any worse.)

The Original Post

I didn't post this Seeking Alpha story earlier this week because it didn't tell me anything really new.

However, it's the end of the week, and time to wrap a few things up, bring a few open stories to closure.

This is a nice update about MDU for newbies. Folks who have followed the oil industry in North Dakota should know the MDU story very well.

I accumulated shares in MDU for twenty years; it was one of the first companies in which I ever invested. I don't remember exactly when, but I know my investment steps occurred in this order: a) get a job that had a retirement plan; b) life insurance (I was married with a family); c) mutual funds; d) individual stocks. It took me about ten years to get from (a) to (d). Two of my first individual holdings were MDU and BNI. BNI was recently bought out by Berkshire Hathaway. [At the time IRA, Roth IRAs, and 401(k)'s were not available. Had they been, they would have been part of step (a). For me those were added along the way.]

MDU got caught up in the global recession and among the "Bakken companies," MDU seems to be lagging, at least with regard to share appreciation. It's been in a trading range for two years and even, going back five years, hasn't done much. It does pay a nice dividend, and its potential is huge, as noted in this very nice update at SeekingAlpha.

I think MDU is yet to break out of this trading range, but I don't think there's any hurry. For investors, be ready to jump in when a) price of natural gas starts going back up (for a nice discussion, click here); and, b) when  we have several months, if not quarters of clear evidence that the global economy has turned. I think the best indicator for the latter is "rail car loadings," a favorite of Warren Buffet's, as long as rail car loadings are not simply a reflection of imports coming from China, which they appear to be right now. In fact, as I say again below, rail car loadings right now could be a contraindicator at worse, a "red herring," at best.

Just out of curiosity, yes, here I go again, off on a tangent, what does the chart on rail car loadings look like? Intermodal traffic is up huge. (Which, by the way, really says volumes about the state of the economy in the US.)  Intermodal traffic refers to the movement of containers or vehicles transferred directly between ships and railroad, railroad and truck, or ships and truck.

Wow, now I'm really getting off track. I reported back in July that the largest port in the US, the Los Angeles Port, set a new record in number of cargo containers ever handled in the month of June. An all-time record. Not just a quarterly record, or an annual record. But an all-time record. As noted in that posting, the port was an active port during World War II. The most recent statistics available show that the LA Port did even better in August, 2010, up 25%, the best showing since 2006. (Unfortunately, this is all due to "stuff" coming in from China, and now so much "stuff" going back to China. So, the railroads and the ports are doing well, but that doesn't necessarily mean US economy is doing well. In fact, ... well ... you can see the derivative itself....)

Anyway, enough of this. Back to MDU. I'm not quite ready to jump back into MDU, but for someone new to investing, who might be a bit conservative, or a bit concerned about investing, MDU is a great place to start. The investment will be very safe (MDU is not going to go away); you will receive a dividend far surpassing what a savings account will get you; the dividend is generally increased year-over-year; and, MDU's potential is huge.