Should You Buy Bonterra Energy Corp. for its 5.1% Yield Today?

Bonterra Energy Corp. (TSX:BNE) released fourth-quarter earnings on March 19, and its stock has responded by falling over 4.5%. Does this decline represent a long-term buying opportunity?

| More on:

Bonterra Energy Corp. (TSX:BNE), one of the leading producers of oil and natural gas in Canada, announced fourth-quarter earnings results after the market closed on March 19, and its stock responded by falling over 4.5% in the trading session that followed. Let’s break down the quarterly results to determine if we should consider using this weakness as a long-term buying opportunity.

The results that ignited the sell-off

In the fourth quarter of fiscal 2014, Bonterra reported a net loss of $32.88 million, or $1.03 per diluted share, compared to a net profit of $15.25 million, or $0.49 per diluted share, in the same quarter a year ago, as its revenue decreased 2.8% to $68.94 million. The company noted that these very weak results could be attributed to “the significant erosion in commodity prices,” which more than offset an 8.3% increase in total production to 13,488 barrels of oil equivalents per day.

Here’s a quick breakdown of 12 other notable statistics from the report compared to the year-ago period:

  1. Production of oil increased 10% to 8,762 barrels per day
  2. Average price of oil decreased 11.8% to $71.37 per barrel
  3. Production of natural gas liquids increased 31.8% to 911 barrels per day
  4. Average price of natural gas liquids decreased 33.6% to $37.49 per barrel
  5. Production of natural gas increased 0.4% to 22.88 million cubic feet per day
  6. Average price of natural gas increased 1.8% to $3.92 per thousand cubic feet
  7. Funds flow decreased 26.4% to $31.93 million
  8. Cash flow from operations increased 5.6% to $50.47 million
  9. Paid out dividends totaling $0.90 per share compared to dividends totaling $0.85 per share in the year-ago period
  10. Capital expenditures and acquisitions, net of dispositions, decreased 20.6% to $20.61 million
  11. Total assets increased 4.2% to $1.04 billion
  12. Long-term debt decreased 1.3% to $154.72 million

Should you buy shares of Bonterra Energy today?

I think the post-earnings drop in Bonterra’s stock was warranted, but I also think the drop has led to a long-term buying opportunity because it trades at inexpensive valuations and pays a very high dividend.

First, Bonterra’s stock trades at 29 times fiscal 2014’s earnings of $1.21 per diluted share, just 5.4 times fiscal 2014’s funds flow of $6.54 per diluted share, and a mere 5.1 times fiscal 2014’s cash flow from operations of $6.94 per diluted share.

Second, the company pays a monthly dividend of $0.15 per share, or $1.80 per share annually, which gives its stock a very high 5.1% yield at current levels. I think the inexpensive valuations and high dividend makes the stock qualify as both a value and dividend play today.

With all of the information provided above in mind, I think Bonterra Energy Corp. represents a great long-term investment opportunity today. Foolish investors seeking an investment in the energy industry should take a closer look and consider establishing long-term positions.

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 Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

edit Woman calculating figures next to a laptop
Dividend Stocks

Should You Invest in BCE Stock for its Dividend?

BCE stock is not yet out of the woods. But this article could change your perspective about the stock and…

Read more »

sale discount best price
Dividend Stocks

Bargain Hunting for Dividends: 3 High-Yield Stocks Haven’t Been This Cheap in Years

Enbridge (TSX:ENB) stock's key enterprise value multiple reached a new multi-year low recently. BCE remains a high-yield dividend play while…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Cash in Your Pocket: 3 TSX Dividend Stocks That Pay Out Monthly

Bolster your monthly income with these three dividends stocks that act like regular paycheques.

Read more »

A plant grows from coins.
Dividend Stocks

Beat the TSX Index With These Cash-Gushing Dividend Stocks

These cash flow-rich stocks are more likely to gush passive dividend income streams long into the future.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Canadian National Railway (TSX:CNR) is a Dividend Aristocrat with 27 years of dividend growth.

Read more »

Woman has an idea
Dividend Stocks

The Smartest Canadian Dividend Stocks to Buy With $500 Right Now

Besides their years-long dividend-growth track record, the strong fundamentals of these Canadian dividend stocks make them really attractive to buy…

Read more »

retirees and finances
Dividend Stocks

No, the CPP Didn’t Squander $46 Billion of Taxpayer Money

The Globe and Mail claimed that the CPP Board mismanaged Canadians' money, but it beat the returns earned by the…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

Better Buy: Telus or BCE Stock

BCE (TSX:BCE) has a higher dividend yield than Telus (TSX:T). Is it a better buy?

Read more »