The Motley Fool

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

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.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share. Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune. Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Joseph Solitro has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.