Black Stone Minerals (BSM) Update - Jan 26

[dan_s]

At the time of this post BSM was trading for $16.47. My updated valuation of $18.00 is the same as TipRanks' current price target. On 1/24/2024 Piper Sandler lowered their price target to $16.00.

BSM is the only MLP in our High Yield Income Portfolio.
> It is a minerals company that is the most heavily weighted to natural gas of the four minerals companies in the portfolio.
> It pays quarterly cash distributions to unit holders that should be able to remain at $0.475/Quarter for annualized yield of ~11.5%.

Based on my forecast, the Company's 2024 free cash flow should cover distributions of $0.475/quarter. If natural gas prices do stay under $3.00 all year, BSM might reduce dividends in 2H 2024.

BSM has a PRISTINE BALANCE SHEET with no debt as of the date of this report and a large cash balance; $90 million at the end of October. They also have an active hedging program that reduces their commodity price risk for 2024.

Conclusion: Not much upside potential for the unit price this year, but the dividends should be maintained. For now, I would rate it a HOLD for the dividends.