Value stocks | General financial discussion | Discussion forum

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Canadian O&G stocks are in the 'Deep'-discounted Bargain Basement now, like I've never seen before❗

I'm thinking of picking up some of the better O&G stocks that pay good/safe dividends (some as high as 15% per annum) ... and sit and wait for the next O&G Boom, while I collect those sweet dividends.

Selkirk (a.k.a. Dean)

AltaRed said
Careful. You may be looking at VET with a 15% dividend yield currently. Payout ratio is above 100%. Value trap? I'd stick with names that have rational dividend payout ratios and have decent balance sheets. With Canadian names, it will be at least 2 more full years before there is new pipeline takeaway capacity.  

VET may have limited downside, though, given the slide that's already occurred. I think the market is expecting a dividend cut, and arguably, a modest cut is likely necessary, but looking at their forecasted earnings, I figure they could still conservatively pay out $0.16-0.17 per share, meaning no more than about a 10-20% dividend cut is necessary* (*unless oil prices rebound, which I'm not expecting). As such, if they were to cut their dividend and still yield 10-11% (instead of 15-16% currently), I think that could be a potential catalyst for the stock.

Still, it's iffy and I'm a bit "gun shy" on this one.

I'm more inclined to look at CNQ, IMO, HSE, ERF, potentially PSK and/or PONY, and KEY. I'd have to do more work on Tidewater Midstream (new owner of HSE's former P.G. refinery), but that's potentially worthy of some homework.

For those who love AltaRed's equity insights, they may wish to head off to the Equities forum at Canadian Money Forum:

https://www.canadianmoneyforum.com/forumdisplay.php/15-Individual-Stocks-Equities

It's a much more focused forum than this HISA- and GIC-related discussion form. As well, the forum threads named appropriately and usefully by the name and ticker symbol of the listed company.

Cheers,
Doug

Bud said
Has ImperialO bottomed? What could drive it down further. Its dividend isnt as good as Suncor. By that measure it looks expensive. Whats Exxon going to do take it private one day they sold Esso why are they allowing their imo shares to be bought back.

Yes, Imperial's dividend yield is not as high, but it's historically yielded sub-2% or even sub-1% (when oil prices were higher). It seems to be forming a base, but it's hard to say for sure without it trading above previous highs—the problem with this, though, is one misses out on a portion of that upside, which is likely to be much more muted in terms of potential given the current supply/demand for oil globally. When I looked on Thursday or Friday, its yield was about 2.6-2.7%—that's still better than any HISA and most GICs, with some upside potential. Moreover, there's the dividend tax credit, so on an after-tax basis, it ties or beats B2B Bank's market-leading 3.30% HISA. And finally, their payout ratio is very low - I think it's sub-30% and could be closer to 20% so even if oil prices tank, there's no concern of a dividend cut. I would probably, frankly, be more concerned with Laurentian Bank or even National Bank cutting their dividend than Imperial Oil.

As to Exxon Mobil potentially buying the remainder of IMO's stock, that's been speculated for years. IMO just did a significant issuer bid to buyback a good portion of their stock, and Exxon Mobil sold back some of its stock to IMO to maintain its roughly 69% ownership position. This suggests to me they don't want to do this; otherwise, they could've let themselves own more, percentage wise, of IMO by owning more of a now smaller float. So, in short, this is a bit of a Mugg's game: XMO could just as easily announce one morning before markets open that they've entered into an agreement with a bank syndicate to purchase x number of shares of IMO from XMO for n price and, following conclusion of the so-called bought deal, XMO anticipates owning reduced percentage y or reduced percentage z if the underwriting syndicate exercises the granted over-allotment option in full. 😉

Husky how much worse could it get

They've sold their P.G. refinery, which I liked, and are marketing their company-owned gas stations and Husky House gas station restaurants. Once that's gone, they basically won't be in downstream anymore, which is somewhat of a negative especially when you consider they aren't really the majority owner in any oilsands assets and most of their assets will be in Newfoundland offshore oil. I'm not opposed to it, but I'm looking at IMO and CNQ before HSE. It does appear cheap, but more homework is needed. It's also somewhat thinly-traded due to Li Ka Shing controlling something like 70% of the stock.

Pembina doesnt look so cheap  

It tends to trade at a premium. I'm personally not a fan. I'd go with either of an IPL, TRP, or ENB.

Cheers,
Doug

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I tend to agree with most of what has been said about the Vermillion (VET/TSX) sky-high dividend (~15%). But for what it's worth, their CEO has once again stated that their present dividend is 'Safe'.

Link ➡ https://www.bnnbloomberg.ca/vermilion-ceo-says-the-dividend-is-safe-1.1341480

Time will tell, I guess.

Selkirk

Bud said
Enerplus was a popular one with big investment houses what happened  

It is holding as well as any upstream producer, and given most of its production is now in the USA, it will generally follow commodity prices.

There is nothing to strengthen share prices on any upstream O&G company given commodity prices are in the doldrums, and there is nothing in the business environment to change them near term.

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CEO of CPPIB talks about investing in Canada's Energy Sector and elsewhere, on BNN.

He makes some interestiing comments ➡ Link

You got lucky, Winnie, just like those who bought long-term bonds 35 years ago when interest rates were around 12% per year.

Had the gold been purchased 20 years earlier in 1979, it would have been purchased around US$300 per ounce and the 20 year experience would have ended with gold around US$290.

Gold also does not produce any income. Those Bank of Montreal shares I bought in the late 1980's now pay me dividends each year of over 55% of their original cost. So, I am receiving my original investment back every two years now.

One needs to understand what was behind the returns one ends up with. Otherwise, one will seriously miscalculate the odds of achieving the same returns in the next ten, twenty, or thirty years.