RE:RE:ANOTHER DIVIDEND INCREASE. navajojoe] wrote i
f the company is prudent, they will delay the dividend increase. Oil has fallen too far to be doing anything stupid right now.
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With oil at around $90 CJ should have cashflow of aprox. $350 million per year or aprox. $175 million in the second half of this year. Capex for the second half of the year should be aprox. $70 million. The dividend at 5 cents per month will cost aprox. $48 million in the second half of the year. They have also promised to pay off the remaining total debt of aprox. $62 million in the second half. When you total Capex, Dividends and Debt repayment it comes out to aprox. $180 million for the second half aprox. $5 million more than they will bring in in cashflow so it is hard to see where they can deliver on their promises to raise the dividend, do share buybacks and pay off all debt by the end of the year.
At the same time CJ should now have debt of aprox. $50 million which is a quarter or less of their historical debt amount so they are in very good shape financially and at $90 oil can pay the 5 cent monthly dividend, do the increased capex and still pay off all or nearly all debt by the end of this year.
Personally i would not increase the dividend or do a lot of share buybacks at this time. They are paying a very healthy dividend which was just reinstated. Pay off all debt by the end of the year and then next year only 5 months away if oil prices stay relatively high they can pay a higher dividend and bank some cash for a rainy day as anyone who has invested in oil stocks knows will come sooner or later.
If they pay off all debt this year and assuming oil stays in the $90 range next year they will have aprox. $350 million in cashflow next year and could do $100 million in capex and still have aprox. $250 million left over. A 7 cent monthly dividend would cost aprox. $130 million which would leave the company aprox. $120 million per year in Free Cashflow for asset purchases, share buybacks etc.
Whether they pay off all debt by the end of this year or the first quarter of next year the high oil prices and huge cashflow of the last couple quarters has made the debt that has been an anchor around this companies neck for may years nearly disappear and soon the banks will not be telling CJ what to do anymore they will be asking what CJ wants to do with all the Cash they have piling up in their bank accounts.
Good luck to all.