congrats unless nat gas prices riseyou own a Corporate Bond of perhaps questionable quality.
and corporate bonds can go down in price for a couple reasons.
business conditions worsen...
or interest rates go UP.
yes the share price of peyto, because it resembles a corporate bond
sooo much, could FALL if interest rates RISE.
and because peyto hedges so much, even if nat gas prices
rise they may not see much benefit from it.
all because they want to protect the dividend.
why is this like a corporate bond now?
let's take a look at the new presentation's 5 year outlook, shall we.
in 2017 peyto earned $178m.
in 2022 management at peyto thinks they will earn $179m.
that seems like not a lot of PROGRESS in 5 years.
capital investments starting next year are expected to FLAT as a pancake.
Dividends, or your coupon, are expected to be UNCHANGED for the forseeable
future. that is not THAT exciting to me!
here is something interesting. According to peyto management, after chopping
the payout almost 50%, they still do NOT
expect to pay their dividend out of EARNINGS in 2019 and 2020. iow, the amount
they pay out to shareholders will EXCEED the earnings of the company.
debt is coming down, but only reluctantly and SLOWLY, and is still projected to be
over $1b in 2022. iow not that much different than today.
I look at the peyto 5 year plan and I see a company stuck in neutral.
the share price is low, and also seems to be stuck in neutral.
the YIELD on the stock is comprable to a BOND.
this boring stock seems to act more like a bond, which don't move around very much.
and that takes me back to my original idea (I love to bring this board fresh new original
ideas that you CAN"T get anywhere else)
and that is...
congrats. you now own a corporate bond.