Post by
vocex1 on Aug 06, 2022 1:30am
PETRUS AND DIVIDENDS
I have posted earlier on this board what was a very optimistic strategy for Petrus to accelerate dividends, actually it was highly unlikely and I knew that, but what the hey, we can dream, right, lol.
Now we have seen the market reaction to early Canadian O+G earnings announcements. Two, for example, are CJ and GXE, they have both come to the decision to reward stalwart shareholders with handsome dividends. In the case of GXE, Gear Energy has initiated a dividend structure of one cent per month, with an extra kicker on one cent to start, to make up for the last month. So for the forthcoming next 12 months, Gear shareholders will receive 13 cents. This dividend is paid on a company with a current share price, closing today @ 1.25 cdn
This is a 10.4 % dividend should investors buy at current price.
Because of this, I have put more cash into Gear shares as I cannot find many shares that will yield this level of returns in the markets in Canada or the US, except for my holdings of Petrobras, the Brazilian national oil company, whose yields are pushing past 50% lately, believe it or not, definitely an exception to the rule in the sector.
As a long-time follower of the Grey family O+G energy enterprises, going back to the beginnings of Peyto, I was pleasantly surprised to see Gear stand up and say to shareholders by their action, essentially "We will share the profits with those who support our enterprise". What a concept, lol.
Meanwhile, many other firms in the sector have already put forth earnings for the second quarter, and although I do not monitor all of them, I make note that, even with huge increases in profits reported(as one would expect with the prices of underlying commodies this year) those that have not also announced either an initiation or an increase in dividends with thier firms quarterly reports, their share prices are not responding to profits boost alone, even if they are also stating that they have retired shares in large amounts via share buy-backs.
So, I am thinking that the market will respond to dividend payouts increasing, but 'not so much' to share buy-backs to drive share price and, essentially, perceived value to the investment community.
Granted, the very recent volatility in the nominal prices of crude and NG have had an effect on share prices in the sector, this is the second share price dive in this sector just in the past 2 months time, right? And this in the face of massive profit increases pretty much across the board in the sector.
However, if Petrus mgmt were to be of one mind with Gear and initiate a dividend with the upcoming earnings report, what would one think the reaction in the market be?
Share buy-backs to me have often been a questionable use of funds, as too many times, mgmt will simply reward insiders with generous stock options as compensation add-ons, so only mgmt wins should they decide not to pay out to shareholders in the form of increased or special dividends.
I will receive a total of $5.00 usd total dividends from PBR since December last simply for retaining my shares, this on a stock I bought for $10.00 usd 9 months ago.
I know, not a fair comparison to many in the Canadian O+G sector, Petrobras is a unique situation with it's own political/country risks.
Let me just summarize that increased dividends will support share prices, and stable and growing market cap will improve the perception of the firm's competency and stability going forward, IMHO.
Gear has taken a path of debt reduction, sown to a minimum level, and now, has started to reward shareholders. When I first got into Peyto, way back when, it was a Royalty Trust model and monthly dividend payouts were very generous, and shared by all, including Don Gray and management who were big shareholders.
Now, with Petrus shares held closely by the Gray family, something on the order of 70% of shares outstanding, will the strategy be to buy back shares, not likely, why would that create shareholder value?
Will strategy be to plow big and growing profits into capex for growth or is cash flow sufficient to finance planned growth and replenishing of reserves?
Will there be a Gear-like consideration to pay out share of profits to shareholders?
We shall find out soon, GLTA