Q: Back in the spring I bought into WCP at about a 1% position, which worked out well (so far). I am considering bumping this up to about a 2% position. Do you have any information about their payout percentage and how low oil could go before the dividend is at risk? I would appreciate any other general comments about WCP, and in particular, would you buy today.
Thank-you
Thank-you
5i Research Answer:
We like WCP and the VRN acquisition we think will be good for the long term growth of the company. The balance sheet is a bit stretched, but growth potential remains very high. 12-month payot ratio is 29%. Much of course will depend on commodity prices and any other corporate moves but we would not see the dividend at risk even at $45 oil. Below that, the company might be more cautious on its dividend but more out of conservatism rather than necessity. The stock is quite cheap and the company well-managed, in our view. Production growth (what it can control) is good and in the Q3 release it raised its production guidance. We would be comfortable buying today, with the usual caveats about the sector's inherent volatility.