RE:RE:Let's do an ARX shareholder poll..Good summary MHP. I tend to agree that Arc needs to keep pace with Tourmaline in terms of paying out dividends. Currently, they are lagging.
There is never any guarantee a few years from now on dividends returning and as you noted, they could again be cut like they did before. Neither Tourmaline nor CNQ cut their dividends.. ARC & Suncor did.. and they are paying for it now as investors have not yet returned - fool me once, shame on you, fool me twice, shame on me.
So are you in favour of a large raise to the base dividend or special dividends?
MyHoneyPot wrote: I am a little shy about expressing my opinion but here i go anyway, the devil made me do it..
Share Buybacks
You can ultimately buy back as many shares as your want, but if the market does not see value in the company, your just reducing your enterprise value, and you have let the management off the hook regarding Company Communication and creating a compelling value proposition.
In fact share buybacks infrige on share holder opportunity and ability to make their own decisions regarding deployment of capital, the shareholders could alway buy more shares if they were given the choice (Paid Dividends) and the management did a great job and they wanted to more stock. Management could also implement some kind of drip that bought back shares with dividend and empower shareholders to make their own decision if they wanted to buy back shares with their dividends.
Share buybacks to me say that you could not invest the money and get a better return, it also is a higher risk move because you are gambling with respect to the return you would ultimately get with respect to your share buyback, if the market collaspes you wasted your money has evaporated.
Share buy backs are just another excuse not to return Capital to shareholders. It a way management can spend a dollars to save 3 cents in dividends.
If management is doing share buybacks they should be forced to stop giving themselves more free shares.
Pay Down Debt
Really paying down debt at 2% interest rates is not a good idea, in fact if you are in a 6% inflation enviroment and paying down 2% debt, does it really make any sense. ARX debt is in my opinion at the right level, very close to 1.0 X FCF or 1/2 X CF seems pretty reasonable to me and with 2% debt really no compelling reason to pay it off.
The arguement to paying off more debt is if you were planning a large capital investment, or an acquisition and need some cash. ARC management says looking through their Rose Colored Glasses that their best opportunites going forward are investing in them selves, i hope that does not mean buying down 2% debt.
Really your retruns on investment should be a lot higher, if your return on investment is 30% and your paying off 2% does that make it look like your putting your money in the best play.
In fact if ARC ramped up Kakwa and increased their FCF 10%, that would have the same impact at paying off 190 million in debt, and they would be generating a lot more FCF. In stead of 1.7 billion it would be more like 1.9 billion and all their ratios would go down in terms of debt financing.
Dividends
Dividends gives investors a compelling reason to own and hold the stock.
Dividends give the investors the option and decision opportunity to buy more shares if the management is doing a good job or take decide to take some risk off the table without having to sell shares, and they have a need of income.
Is that not a good thing to give investors some decision of how the money that is generated from their investment is spent?
Dividends ultimate attact shareholders that want good returns, and it creates demand for the stock with a reason to hold it and hang onto it for the long term, not just to trade.
Good sustainable dividends are signs of great management. (ARX's management Bibby and Terry, slashed ARC's dividend when they were appointed CEO and CFO and have never restored them.
Dividends you need to take them when the company can pay them, ARC was suppose to be a rock solid company that would never cut the dividend because of their great risk management. However they slashed the dividend and their share price collasped, case in point.
IMHO