"Here in Canada, one stock has been enjoying a much better week. Jim Riddell's Alberta Montney- and Duvernay-focused Paramount Resources Ltd. (POU), up 33 cents to $17.08 on 356,00 shares, has added nearly $4 since announcing last Friday that it wants to start paying a dividend. The proposed two-cent monthly payout represents a yield of 1.4 per cent. Stockwatch noted last Friday that Paramount has been enjoying the rally in oil prices both directly and indirectly, thanks in part to its minority interest in fellow Montney producer NuVista Energy Ltd. (NVA: $3.77). A $10.5-million investment that Paramount made in NuVista last September (triggering takeover speculation) is currently worth $65-million. Now Scotia Capital analyst Cameron Bean has noticed the same and has issued a research note entitled "The POU/NVA Combination Question Revisited."

Mr. Bean expressed mixed feelings about a merger. In his view, it would be "a clear win for POU shareholders," but NuVista's shareholders might show reluctance unless Paramount offers a major premium -- say, 30 to 40 per cent. The new dividend gives NuVista's shareholders an extra incentive, mused Mr. Bean. He added that the combined company would be able to favourably refinance NuVista's lofty debt (including $220-million in notes due in early 2023) and might even muscle its way into the S&P/TSX Composite Index (as Paramount fell just short of the requirements during the latest quarterly rebalancing period). All in all, the analyst sees "a decent balance of potential positives" on both sides. Interestingly, none of this was enough to prompt Mr. Bean to raise his price target on either stock, and those targets are well below current trading levels. NuVista has a price target from Mr. Bean of $2.75, whereas it closed today at $3.77. Paramount has a $15 price target and closed today at $17.08."