Q: What are the prospects for Gear Energy considering the 50% dividend cut.
5i Research Answer:
Production in the quarter was flat, so the main problems were lower prices and higher costs. The balance sheet is solid, and with the dividend yielding 13% before the cut was (largely) expected. Management may be playing extra conservative here until prices recover. We don't like averaging down, and do not like any dividend cut. But with the stock hit already in place, its low valuation, balance sheet and (now) 6.8% dividend, we think shareholders can hold here. We would not be interested in buying more.