RE:RE:A decent read. JohnnyDoe wrote
MohelJFox wrote: A little conservative on the debt timing but check out that dividend !
"The image above is based on a 50% payout ratio. But this enables us to run the numbers using a 75% payout ratio (a 50% increase). At $90 oil, the monthly dividend would increase to C$0.10 for a yield of in excess of 15%. But that also means that if the oil price drops to US$70/barrel, the current monthly dividend could be maintained at approximately C$0.05/month."
https://seekingalpha.com/article/4525020-cardinal-energy-8-percent-yielding-income-stock
it apparently doesn't take a lot of credentials to write articles for Seeking Alpha. The company has stated that the current dividend is sustainable at 55 wti.
I think, given the track record of oil companies, that they should use special dividends to reward shareholders and employ at base dividend sustainable at something in the 50 - 55 range. Historically when dividends get high, stocks get bid up, then a down cycle starts and the stocks get crucified. Hopefully they've all learned.
-------------------------------------------------------
Many people also never seem to learn no matter how many oil and gas price cycles they go for. A lot of investors just seem to want huge dividends when oil prices are high and not worry about anything else. As you point out oil prices can also drop and huge dividends can get cut as has happened before.
A base dividend of 5 cents per month plus a special dividend when oil prices are high is a good conservative way to go. The special dividend can be cut when oil prices drop and raised when they go up. A 7 cent monthly dividend would cost aprox. $130 million per year and still leave the company aprox. $130 million per year in Free Cashflow which could be used for share buybacks., asset purchases etc.
A 7 cent monthly dividend or 84 cents per year is an aprox. 10.5% yield at todays shareprice which is a very nice yield. Even after paying that hefty yield the company can still pocket aprox. $11 million per month which will make the company stronger over time.
Its the best of both worlds for CJ shareholders. Great dividend sustainable at low oil prices and lots of Free Cashflow piling up for the company. The one good thing about CJ is that even if they choose to pay a very high dividend using most of Free Cashflow their debt will soon be gone and even if oil prices were to crash they will not have $200 million or more in debt to worry about as they have had for many years.
After the sharp correction of the last weeks the shareprice is climbing nicely and when results come out in a few days it should make the shareprice really fly as the market sees the huge Free Cashflow pouring in and debt disappearing.
Good luck to all.