Crude Reality: The Stockpicker’s Guide to Crescent Point Energy Corp.

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) pays a solid 9.5% dividend despite tanking oil prices. Here’s why this stock is a solid pick for many investors.

| More on:
The Motley Fool

The current volatile oil environment is now reaching a point where it’s going to be the survival of the fittest. Below $50 oil prices may be here to stay for a while. Or it may be a six- to nine-month phenomenon. It’s anybody’s guess. What matters most right now is the manner in which companies handle this pressure. There is one company that seems to be doing everything it can to protect its investors and weather this storm: Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG).

Crescent Point has been a darling to investors for years now and is renowned for never cutting its divided. The company, like its peers, is feeling the pressure of lower oil as prices hover around US$47.

The company, however, refuses to give in to the pressure and cut its dividend. Nor does it intend to cut production anytime soon. Instead, it’s adopting other measures to minimize costs, like cutting its capital-spending budget and reducing some of its work force.

Earlier this year, Crescent Point announced it intends to cut its capital expenditure budget by 28% for this year. It also said it will lay off 1,000 employees. Such moves may seem drastic but they are common (and expected) during such challenging times. Instead of cutting production, Crescent Point plans to lower its service costs from producers. The company will look for better deals from its contractors.

Crescent Point’s great asset quality is another reason it’s a favourite. The company is known for aggressively acquiring quality properties and has some of the highest quality assets in the industry. Although the current oil environment is tough for all producers, this will certainly create some great acquisition opportunities at attractive valuations.

Finally, Crescent Point has spent decades to build a trusting relationship with its investors. The company maintained its dividend through past oil crashes and now shareholders trust that Crescent Point will continue to protect their dividend and deliver.

I’m not sure how long oil prices will stay at current levels. But I reckon it is bound to go higher sooner or later since producers (OPEC or others) will not be able to keep up with low prices. Once that happens, it is companies like Crescent Point that are worth a snag.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

More on Investing

edit Jars of marijuana
Cannabis Stocks

Is Tilray Stock a Buy in the New Bullish Market?

Canadian cannabis producer Tilray has underperformed the broader markets in the last five years due to its weak fundamentals.

Read more »

Woman has an idea

3 No-Brainer Stocks to Buy With $200 Right Now

These three stocks are no-brainer buys, given their solid underlying businesses and healthy growth prospects.

Read more »


2 Stocks I’m Loading Up on in 2024

Alimentation Couche-Tard (TSX:ATD) and another stock that are getting too cheap after their latest corrections.

Read more »

grow money, wealth build
Dividend Stocks

1 Top Dividend Stock That Can Handle Any Kind of Market (Even Corrections)

While most dividend aristocrats can maintain their payouts during weak markets, very few can maintain a healthy valuation or bounce…

Read more »

Red siren flashing
Dividend Stocks

Income Alert: These Stocks Just Raised Their Dividends

Three established dividend-payers from different sectors are compelling investment opportunities for income-focused investors.

Read more »

online shopping
Tech Stocks

1 Hidden Catalyst That Could Ignite Shopify Stock

Here's why Shopify (TSX:SHOP) ought to remain a top growth stock investors continue to focus on for the long haul.

Read more »

Oil pumps against sunset
Energy Stocks

Is it Too Late to Buy Enbridge Stock?

Besides its juicy and sustainable dividends, Enbridge’s improving long-term growth prospects make it a reliable stock to hold for the…

Read more »

Man considering whether to sell or buy
Tech Stocks

WELL Stock: Buy, Sell, or Hold?

WELL stock has a lot of upside as the company is likely to continue to grow, posting positive earnings in…

Read more »