This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Loews Exposed to Boardwalk Pipeline Tumble as CNA Surges

NEW YORK (TheStreet) - Loews Corp.  (L), the holding company with majority ownership of CNA Financial (CNA - Get Report), Diamond Offshore Drilling (DO) and a hotels business, is exposed to Boardwalk Pipeline's (BWP - Get Report) falling shares after the midstream master limited partnership (MLP) cut its dividend by about 80%.

Loews owns about 57% of Boardwalk Pipeline's shares, meaning that the company's equity ownership stake fell by more than $1 billion on Monday after Boardwalk Pipeline said it would cut its quarterly dividend to 10 cent from the company's previous 53-cent distribution in November.

The falling value of Boardwalk Pipeline combined with sharply lower quarterly distributions could impact Loews 2014 earnings. In 2013, the midstream MLP contributed nearly $300 million to Loews' bottom line, mostly from the company's high quarterly dividend. Now, annual distributions of just 40 cents are poised to bring in only $50 million a year to Loews as a majority shareholder.

CNA Financial, Loews' biggest investment, however, said on Monday it would sell a life insurance unit for $615 million, leading to a surge in the company's stock. CNA Financial shares rose more than 7% to a new five-year high of $42.67 in afternoon trading. CNA also announced a $1-a-share special dividend and a 25% increase to the company's quarterly dividend.

The Chicago-based insurer's share gains and rising capital returns to investor are likely to help Loews offset some of the impact of Boardwalk Pipeline's Monday tumble. Loews owns nearly 90% of CNA Financial's outstanding shares, meaning the company will see most of the cash from a special dividend and dividend increase.

On Monday, Loews reported a fourth-quarter loss on a $398 million goodwill impairment charge to the company's HighMount Exploration & Production business, a result of low market prices for natural gas and natural gas liquids and negative reserve revisions.

Overall, Loews reported a $198 million loss for the fourth quarter on about $4 billion in quarterly revenue. For the full year, the company reported $15 billion in revenue and a net profit of $595 million.

Some of the issues that caused fourth-quarter impairments at HighMount also caused Boardwalk Pipeline to cut its dividend. Boardwalk said it decided to cut its dividend to strengthen the company's balance sheet and to react to unfavorable market fundamentals in the natural gas transportation and storage market.

Loews said on a conference call with analysts that CNA Financial's life insurance unit sale and special dividend were unrelated to Boardwalk Pipeline's dividend cut. The company also said Boardwalk Pipeline cut its dividend from a "position of strength."

Analysts at Deutsche Bank and Credit Suisse cut Boardwalk Pipeline to "sell" on its dividend cut and said the move and its magnitude were unexpected. In December, Hedgeye energy analyst Kevin Kaiser questioned whether Boardwalk Pipeline had the earnings and financial strength to maintain its dividend.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BWP $16.35 -0.12%
CNA $41.00 0.00%
AAPL $124.24 0.00%
FB $83.01 0.00%
GOOG $555.17 0.00%

Markets

DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs