Would you be able to comment on Cardinal Energy’s dividend and what you estimate for their future.
Thanks for the assignment. Cardinal Energy Ltd. (CJ TSX) began operations in May of 2012 with the mission of becoming a dividend paying oil company. In December of 2013 CJ concluded their initial public offering selling 21.4 million shares priced at $10.50. The $225 million raised was used to pay for the acquisition of assets from Penn West Petroleum Ltd. (PWT TSX). The purchase increased production to 6,275 barrels of oil per day from 5,800 BOPD.
The company has been paying a monthly dividend since February of 2014 and even increased it in September of this year. The dividend currently yields 4.53%. The company has little debt and owns producing assets with low decline rates which puts some support under the dividend. The research conducted on your behalf indicates that management has closed on two accretive acquisitions since July that have added to daily production. The company issued shares in a bought deal to finance the purchases.
An investigation of the charts will inform my comments on this company.
The one-year chart is a masterpiece that contains all the elements of a money making investment. The advance that started after the IPO was slow and steady with retests of support along the uptrend line and the 50-day moving average.
The shares have built varying levels of support along the way most notably at $16.00, $18.00,and $20.00. Since the pullback from the 52-week high at $20.96 in August, CJ breached support at $20.00 and is now testing support at $18.00. The pullback has to be viewed in the context of the share issuance to finance the asset purchases since July.
The MACD and the RSI both generated sell signals as CJ came off the 52-week high and then broke below $20.00. At this juncture the momentum indicators are not signalling an upside move. The stock has to build and hold support at $18.00 if a new leg up is to emerge.
The six-month chart provides a close- up of the support at $18.00 and the resistance that has been encounters along the 50-day moving average. The chart also provides a good example why its important to monitor the MACD and the RSI of the stocks that you are holding. It might take a while for the market to digest the increase in shares outstanding associated with the acquisitions at Wainwright.
The next scheduled announcement will be the release of Q3 results in November.
Make it a profitable day and happy capitalism!