Superior Plus Corp. not suitable for seniors

Sep 28th, 2011 – Comment

I don’t honestly believe that SPB is suitable for a senior looking for income.


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Energy.


 

 

Hi Lou,

I am interested in your opinion on SPB. 

I like the monthly dividend. I am a senior and have no pension income and therefore I have to generate my own.

Do you know of other companies paying high dividends?

Thank you

Tony

 

 

Hi Tony,

This will be the fifth time that I have run the charts on Superior Plus Corporation (SPB TSX) since September of 2010. The last post was on February 23, 2011 for Rod. At the time the shares were trading at $11.10 as investors suffered through a cut in the dividend. The last seven months have been trying to say the least as selling pressure has continued to shred value. In February it was advised that holding a falling stock to earn a dividend is a self defeating strategy.

A review of the charts will shed some light on the risks and opportunities surrounding SPB.

 

 

The three year chart illustrates the downtrend the stock has suffered through since the board cut the dividend in February. Management is using the the cash that would have gone to shareholders in the form of dividends to reduce its debt load. The selling pressure accelerated with the market panic of August and took another hit on September 12, 2011 when Dominion Bond Rating Service cut the debt rating on wholly owned subsidiary Superior Plus LP.

 

 

 

The six month chart depicts the bounce the shares caught off a double bottom that formed in September at $8.25. What you need to focus on is that there is a sustained downtrend in place and a death cross that surfaces in late August.

 The move off $8.25 on volume of 846, 176 was ahead of the average daily volume of  237, 341 over the last three months. However keep in mind that the advance only reflects one day of trading. I’d like to see a sustained buying trend to overcome the selling pressure that has plagued SPB.

I understand that investors are attracted to high dividend yields. But you have to recognize that you never get a high payout without taking on additional risk. As a senior you need to generate income from your assets but can you afford to lose assets to generate high risk returns? The current dividend yield on SPB is 14% but its not a risk free return. I don’t honestly believe that SPB is suitable for a senior looking for income. The object lesson is that in the last year the company had to cut its dividend to shore up its balance sheet.

There are lots of companies offering high dividends. The only question is can you afford the risk that goes with the higher payout.

Make it a profitable day and happy capitalism!

 

 

 

 

Categories: Energy
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media