In spite of very difficult times in the Canadian oil sector for at least two full years now, companies such as Cardinal Energy Ltd. (TSX: CJ) and Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) have both managed to continue paying monthly dividends in spite of share prices that have declined by close to 50% over the past year. Although investors have been hit hard, we must remember the old saying: “…be fearful when other are greedy and greedy when others are fearful.”
With that in mind, we begin with Cardinal Energy, which is now worth no more than $550 million, as investors have sent shares down significantly in spite of substantially higher revenues over the past fiscal quarter. Although the dividend yield is currently a very generous 8.5%, company management may not be feeling the pressure (that we’d expect) to cut the dividend, as the cost is only 54% of cash from operations (CFO) throughout the first three quarters of this year. The company has $40 million in cash on the balance sheet is in position to pay the dividend for a very long time before it has to worry about its ability to do so. As long as oil recovers eventually, investors are expected to make a fair profit.
In the case of Crescent Point, things are much better, as the dividend accounted for no more than 12% of CFO during the first three quarters of the year. Although the yield is no more than 3.9% at current levels, investors are taking on much less risk with this name, as its total market capitalization of almost $5 billion is close to 10 times that of Cardinal Energy. To boot, the share price of Crescent Point trades at a much lower multiple to tangible book value than shares of Cardinal Energy.
For those seeking the safer yield between these two companies, the upside can be found in shares of Crescent Point.
When looking beyond both of these names, shares of Bonterra Energy Corp. (TSX: BNE), at a price of $14.25, also pay a monthly dividend of more than 8%, while consuming only 38.7% of CFO for the first three quarters of this fiscal year. Although investors will be well paid to remain patient, the catalyst in this name may never come. As of the most recent quarterly financial reports, the stock carries tangible book value of $12.76, while trading at a premium to that number.
Although many investors are extremely happy to find names that offer relatively high monthly dividends, it remains extremely important to appreciate the ongoing business operations of the entity. Essentially, there is no substitute for disciplined investing.
