I am not comfortable opening new positions the day after Thanksgiving since I know many of you will on travel and not able to execute an order, so this week I’m doing a little portfolio maintenance instead to prepare for what I believe could be a particularly volatile market in December.

I don’t mind holding a long equity position at a loss provided it is still paying a healthy dividend. I am a patient investor and will gladly collect the dividends until the share price eventually recovers. But once an underperforming holding cuts its dividend then my patience starts to wear thin.

Such is the case with Sanchez Midstream Partners (NYSE: SNMP), a holding we inherited in May 2017 from one of our predecessor services, MLP Profits. During the first year that we held SNMP, its unit price remained fairly steady while it paid a double-digit dividend yield so I held onto it.

However, over the past four months its unit price drifted lower despite no specific news to explain the decline. Last week, we found out the hard way when the company announced a reduction in its quarterly distribution to 15 cents per unit.

The good news is that will result in a coverage ratio of 2.7 times the distribution, which should be sustainable going forward. That bad news is that amount equates to a 60% reduction over the prior distribution, disqualifying SNMP as an Income Millionaire portfolio holding.

Furthermore, the company’s CEO acknowledged that excess cash flow will be directed towards enhancing unit value instead of maximizing distributions to investors:

“Notwithstanding, we note that capital markets have generally shifted away from valuing master limited partnerships on yield and see little opportunity to fund growth at the Partnership with equity issuances in the current environment… Having declared the new cash distribution, we plan to use cash from operations to fund growth capital, reduce debt and position the Partnership to repurchase common units over time.”

That pretty much says it all. Don’t expect to see any distribution hikes anytime soon from Sanchez, even if operating results are strong.

Sell Sanchez Midstream Partners.