RE:Dividend SafetyAt the current oil price of aprox. $68 CJ should have Cashflow of aprox. $ 185 million per year. The 6 cent dividend costs the company aprox. $112 million per year. That would leave aprox. $73 million per year for Capex which is currently budgeted at $120 million for this year.
If oil prices remain around these levels this year CJ would have to cut Capex nearly in half to keep paying the current dividend. It could be done for awhile but if oil prices did not go back up and even worse keep falling the dividend will have to eventually be cut.
In my opinion the dividend was way to high from the beginning last year. They have set it so high that they need $80 oil to break even. The maximum the dividend should have been is 4 cents per month or 48 cents per year. That would have saved CJ aprox. $35 million per year while still giving a nice yield to shareholders. At a 4 cent monthly dividend CJ at the current $68 oil price would be able to pay that dividend and still have enough money leftover to do aprox. $110 million per year in Capex.
They went large believing all the hype along with many on this board that oil price would stay high. How many times have we heard $100 oil is around the corner over the last decade? And here we are again at $68 and dropping.
And some on this board are still dreaming of paying off all debt and dividend increases in short order. Ha. ha, ha. Some funny people around here. At current oil prices with the current Capex and Dividend CJ is spending aprox. $4 million per month more than they are taking in. If oil prices stay in this range and the dividend and Capex remain the same CJ which ended last year With $62 million in Net debt will end this year with aprox. $110 million in Net debt.
Lets hope for higher oil prices going forward.
Although investing on hope is something that doesnt always work that well i have found.
Good luck to all.