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November 3, 2019
6:07 am
Bud
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I see value in the oil sector
Anywhere else
Nervous about asset values
Is it possible to build a value portfolio resilient to a market downturn
Names?

November 3, 2019
8:10 am
Selkirk
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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)

November 3, 2019
8:30 am
AltaRed
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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.

November 3, 2019
10:28 am
Bud
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V

AltaRed said
I'd stick with names that have rational dividend payout ratios and have decent balance sheets.  

Top picks?

November 3, 2019
11:07 am
miro
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Around 3B cap:
ARX
ERF
FEC
PXT
TOU
VII
over 9B cap:
CNQ
ECA
HSE
IMO
PPL

November 3, 2019
4:15 pm
Doug
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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

November 3, 2019
7:47 pm
Bud
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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.

Husky how much worse could it get

Pembina doesnt look so cheap

November 4, 2019
8:24 am
Doug
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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. sf-cool

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

November 4, 2019
9:13 am
AltaRed
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Concur with your thoughts Doug. A few added comments. Many of the big oil companies are getting out of distribution and retail, and in a few cases, as far back as refining as well. There simply is not enough money in distribution and retail.

Suncor is the exception where they value their Petro-Canada chain of refineries and retail stations. I believe, but not sure, where Shell stands on their retail network but they have shed a lot of their Canadian assets in recent years. If they sell, then it leaves only Suncor nationally as fully integrated.

Personally, I believe shedding retail is a good move by most majors. Companies like Valero (eastern Canada), Parkland Fuels and Alimentation Couche-Tard can do a more focused better job at distribution and retail. Valero has the refinery in Levis, QC and of course Parkland has the Chevron Burnaby refinery now.

I don't think XOM will ever buy out the portion of IMO they don't already own. The current relationship works well, and the assets that XOM own directly in Western Canada are in joint ventures with IMO, with IMO as the operator (e.g. Kearl oil sands).

FWIW, I never look at dividend yield as a key factor in stock ownership. What matters is increasing EPS and preferably double digit ROE on the financials, and ultimately, Total Return (capital appreciation and dividend growth).

November 4, 2019
10:28 am
Selkirk
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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

November 4, 2019
1:42 pm
Doug
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Selkirk said
.
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  

Dean,

Yeah, I think it's safe until it isn't, if that helps. 😉

What I mean by this is that if low world prices continue 12 months from now, then a cut is definitely more likely.

To be honest, I think they're actually doing themselves a disservice by not even considering a small cut to the dividend (they don't need to cut by much; a 10-20% cut, which would still yield north of 10%, could be fully covered by current cash flows last I checked). It's creating uncertainty and unease in the marketplace.

Cutting dividends isn't so bad; most people look at it as some ominous sign of a change in trend, but I'd point out even National Bank of Canada has cut its dividend following 2008. The market seems to have completely shrugged that off. Likewise, Home Capital Group eliminated its dividend and there is growing pressure for the company to return excess capital to shareholders instead of sitting on the bags and bags of cash (profit) they're generating.

Cheers,
Doug

November 4, 2019
6:21 pm
Bud
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not impressed with Vet hodgepodge of assets scattered across the world not focused? maybe theyll sell off assets thats how theyll maintain their dividend

Enerplus was a popular one with big investment houses what happened

November 5, 2019
9:25 am
Selkirk
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Doug said

Dean,

Yeah, I think it's safe until it isn't, if that helps. 😉

. . .

Cheers,
Doug  

So true ⬆

But they could cut their dividend by 50%, and it would still be Very Handsome❗

Selkirk sf-cool

November 5, 2019
11:41 am
AltaRed
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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.

November 5, 2019
2:50 pm
Selkirk
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Bud said

not impressed with Vet hodgepodge of assets scattered across the world not focused?

. . .

'Hodgepodge'⁉

Most people would call it; 'Diversification'

sf-cool

November 6, 2019
8:21 am
Selkirk
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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

November 7, 2019
1:47 pm
Winnie
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Bud said
Nervous about asset values
Is it possible to build a value portfolio resilient to a market downturn
Names?  

I'm not nervous at all about my assets values and I think, that my portfolio is resilient to any future market downturns, based on my portfolio previous 20 years history.

In 1999 I invested $152,000 and in 2019 my investment value is approx. $820,000. That would be an average approx. 9% per year (compounded yearly) for all 20 year. Absolutely no any fees, just clean investment and clean return. I can choose to pay capital gain taxes after selling. But, because this investment isn't connected to my name and/or SIN whatsoever, I'm absolutely free to pay capital gain taxes on my discretion.

I don't know anything about stocks and don't want to learn either. I like simple life and simple, not stressful money management. I'm just interested, if anyone here had better investment performance (stocks or other investments), than clean 9% average per year for 10, 15, 20 or more years? How my very simple investment return compares to really advanced calculated stocks or other investments? Thanks

November 7, 2019
5:05 pm
Bud
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Winnie how can you know nothing about stocks and earn that return what did u invest in and survive two major downturns around 911 n 08. dot.com bubble enron income trusts n more how did you do it?

u control capital gains how thru a corporation..

still credit to you investors who remained faithful could have had that return which really shows the effect of compounding

November 8, 2019
6:50 am
Winnie
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Bud said
Winnie how can you know nothing about stocks and earn that return what did u invest in and survive two major downturns around 911 n 08. dot.com bubble enron income trusts n more how did you do it?

Bud, I purchased a physical gold bullion (bars), $370 CND ($250 US) per ounce in 1999.

Right now, in 2019, I still buy the same physical gold bullion (bars and coins) - that is my simple, not stressful money management. I just like gold.

I'm sure, that I'm well protected from possible future major downturns, recessions, negative interest rates and other scary things. I'm very happy with my investment choice.

November 8, 2019
7:47 pm
Joe
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Winnie said

Bud said
Winnie how can you know nothing about stocks and earn that return what did u invest in and survive two major downturns around 911 n 08. dot.com bubble enron income trusts n more how did you do it?

Bud, I purchased a physical gold bullion (bars), $370 CND ($250 US) per ounce in 1999.

Right now, in 2019, I still buy the same physical gold bullion (bars and coins) - that is my simple, not stressful money management. I just like gold.

I'm sure, that I'm well protected from possible future major downturns, recessions, negative interest rates and other scary things. I'm very happy with my investment choice.  

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