Paramount Resources Jumps 10% After Dividend Boost

Paramount Resources (TSX:POU) saw a flood of new investors wanting in on the company’s dividend. Shares jumped 10% overnight.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 16, 2021 11:28 am EST

Paramount Resources (TSX:POU) shares jumped 10% in early morning trading on Dec. 16 after the company started its new dividend. Paramount now trades at $22.85 as of writing with a price-to-earnings ratio of 7.09.

What happened?

Research analysts continue to weigh in on Paramount Resources, with a consensus “buy” recommendation for the stock. The average target price now sits at $28.59 — a potential upside of 25% as of writing.

After Paramount’s most recent earnings report in November, analysts started to up their targets for the energy company. National Bank, Royal Bank, and Scotiabank all came out in support of its recent growth and the addition of a dividend.

That dividend is likely what caused investors to buy the stock, as the company stated investors of record on Dec. 15 would receive its dividend of $0.06 per share starting Dec. 31. This represents $0.72 annually from its dividend — a yield of 3.47% as of writing.

So what?

Nothing of note really happened with Paramount. Instead, it’s the new dividend that likely caused the jump. Still, that doesn’t make the company a poor investment.

The $3.22 billion company’s assets continue to perform well, creating free cash flow that have been impressive, according to analysts. Despite facility constraints, it’s been delivering enormous returns to shareholders. The company is currently up a whopping 305% this year alone and climbing.

Yet the company remains a steal, even with all this growth. It trades at 7.09 times earnings, and 1.29 times its book value, making it a value stock — especially when you take into consideration its dividend yield of 3.47%.

Now what?

Investors may not be able to get the first dividend payment today, but you can certainly latch onto this stock for strong returns. Paramount continues to see its investments rise, and so do analysts. As energy prices continue to climb as well, the company is surely able to bring in more long-term value.

And with prices still low compared to its value, it’s a great time to pick up Paramount stock at these levels. Even after the 10% jump. Besides, as a monthly dividend payer, there’s always next month!