Usually, greater risk comes with a higher-yielding company such as Crescent Point Energy Corp (TSX:CPG)(NYSE:CPG). That’s why the market allows its yield to be higher than the average yield. Even before the oil price drop, Crescent Point yielded 6.5%, higher than the average yield of 3-4% of solid dividend companies.

Just how should investors view Crescent Point? Here’s my experience.

My initial goal of buying Crescent Point is to receive a high income that I believe to be safe. So far, I have averaged down once, and my yield on cost is now over 10%. Compare that to Crescent Point’s yield of 13.9% today.

My combined shares are down by 27% because Crescent Point Energy continues to make new lows and there’s no end in sight. After the oil price fell from over US$100 to below US$50, it hasn’t shown any signs of recovery.

Is Crescent Point’s dividend still safe?

Since paying a monthly dividend from September 2003, Crescent Point has not cut it once, which is almost 12 years of continuous dividend payments. And on July 2, the company’s guidance for 2015 includes the $2.76 dividend with higher production of oil and natural gas liquids, and natural gas. At times of low prices, higher production volumes increases the safety of the dividend.

Its hedging program also provides cash flow stability. Fully 54% of oil production for the second half of 2015 is hedged at $87.50 per barrel. Crescent Point is not overly reliant on debt, with a debt-to-cap ratio of 26%. Its recent acquisitions of Legacy Oil + Gas Inc. and Coral Hill Energy Ltd. are accretive on production and cash flow. So, I believe there’s no immediate danger to Crescent Point’s dividend.

How to reduce risk?

I will limit my Crescent Point position to no more than 2.5% of my portfolio. Further, I’m averaging into my position instead of buying in a lump sum so that I can choose my buy price and choose how much to buy manually. This also means I’m not automatically reinvesting the dividends that offers a 5% discount. By collecting the dividend, I can use it to diversify into other investments to reduce concentration risk.

If you’re looking for a high yield investment in Crescent Point, I think its shares are cheap under $20. That is a discount to its book value of $22.55. Oil price remains low and volatile, so Crescent Point is not for the faint-hearted. For now, I will sit back and take in the monthly juicy dividend.

2 energy plays for your watch list

Check out our special FREE report "2 Canadian Energy Stocks on the Cusp of a Powerful Long-Term Trend". In this report, you'll find that Canada is rich in other energy sources that are poised to take off. Click here now to get the full story.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Kay Ng owns shares of Crescent Point Energy Trust Units.