RE:RE:RE:The $120m question: Pay down debt or buy back shares?Ceremony: Yasch22 was looking for a "case" where buy-backs trump paying down debt. Cutting down dividends is always prudent but this almost, always negatively impact shareholders value. In this case, as Peyto currently pays 6.92% dividends vs 4.39% interest on loan, reducing the number of shares outstanding through share buy-back is a better strategy.
ceremony wrote: a prudent steward of capital would CUT THE DIVIDEND in that case.
EquityInvest wrote: Yasch22 - As you are looking to justify share-buyback as a superor strategy over paying-down debt, in terms of improving shareholders value, one case that can be made is that it at current sp of $10.41 Peyto is paying out dividend at a rate of 6.92% (.06/m * 12 months / $10.41) which is much higher than the available 4.39% re-financing rate. In Peyto's case, it is more of a drain on its cash flow to continue to pay 6.9% dividends on the current outstanding shares rather than continue paying 4.39% interest on short-term loan. It will benefit the company more to buy back shares thereby reducing the number of shares that the company will be paying dividends on. However, share-buy backs do not always work out as "bad-timing" can ruin the strategy (i.e., greater market sentiment continue to deteriorate).
Just my opinion.
Yasch22 wrote: Ceremony -- or anyone -- I'd be interested in seeing a case made for buying back shares as a superior strategy to paying down debt.
Assumption: You know Peyto will generate $120m in net cash in 2018. Which is the better course to follow: pay debt or cancel shares?<br />