Analyzing 5-Monthly Dividend Stocks

Includes: AT, BTE, ERF, PBA, PGH
by: Todd Johnson

Monthly dividends can provide the necessary income to pay for one's living expenses. Finding the appropriate stocks is vital. An appropriate stock should have adequate free cash flow to meet monthly distributions and still maintain capital expenditures for any ongoing projects. Here are 5-stocks I own which I believe offer value as ongoing-businesses and pay month-in and month-out dividends.

1. Atlantic Power Corporation (NYSE:AT)

AT provides electricity to utilities in the U.S. The electricity is sold under long-term power purchase agreements with U.S.-based utilities. AT is focused upon providing a stable revenue stream in order to satisfy monthly dividends to shareholders. Secondly, AT management has explicitly stated the company will make acquisitions if the earnings are accretive to earnings. The company's project listings clearly delineates AT's projects, AT's proposed projects, and the respective ownership percentage per each project.

  • Current Projects: AT owns 14-projects within the U.S. The percentage of ownership extends from 100% in Auburndale, Florida to a 17.1% project ownership in Corpus Christi, Texas.
  • Clean Energy: AT is focused upon providing clean energy as an alternative to U.S. projects. Clean energy includes biomass and wind energy projects.
  • Projects in Development: AT has a 95% stake in a Piedmont project in Barnesville, Georgia. AT continues to pursue projects which can incorporate renewable energy and provide accretive income to the firms net earnings.
  • Monthly Dividend: AT pays a monthly dividend based upon a Canadian dollar annual dividend of $1.094. The monthly distribution is paid in U.S. dollars. May 2011's dividend was 9.3-cents per share. This equates to a $1.12-annual dividend. Based upon a $15.30 closing price, AT provides a 7.4% yield. This yield provides a stable income flow from energy. Most economists view energy costs as a necessary living expense versus a discretionary living expense, such as dining at a fancy restaurant.

2. Baytex Energy (NYSE:BTE)

As the below chart shows, BTE has an impressive 29.3% rate of return over the past 6-years. The dividend did take a hit in calendar year 2009, but resumed its upward trajectory in 2010.

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  • Monthly Dividend: BTE is currently paying a 20.6-cents per share dividend. This dividend can fluctuate from month to month based upon the U.S. and Canadian currency conversion rates. The dividend equates to a $2.44 annual dividend payout. Based upon a $54.07-stock price, the $2.44 dividend equates to a 4.5% dividend yield.
  • The 4.5% annual dividend appears low compared to its peers. The company, however, is on the track to truly increase the long-term growth prospects of oil production. In response, BTE's dividend should increase at a greater rate than its peers. Management clearly has its eyes on value creation for the long-term. This is recognized not only through share ownership, but transactions which will provide cash flows out 3-5 years from present day.
  • CEO Marino has a clear vision to bring enhanced value. This is a mission statement he has reiterated over-and-over. Every project has an assumed break-even cost. Marino is cognizant of this barrior and works with his team to ensure the returns exceed the risks and monetary value put at stake per each individual project.
  • BTE has achieved out performance amongst its peers. The focus has been on developing low cost drilling programs. BTE's focus has been and continues to be primarily oil focused. Oil is approximately 92% of total revenues.
  • BTE continues to focus upon growing proven and probable reserve life of its assets. This focus upon future growth has kept the stock at the head of top performing Canadian income plays.

3. Enerplus Corporation (NYSE:ERF)

ERF is a mainstay in the Canadian oil producing sphere. ERF paid 19-cents per share in May 2011. ERF's stock dipped into the low $20's during the financial meltdown in 2009. The monthly dividends, however, have continued to deliver. The stock has rebounded to the low $30's, and continues to provide solid dividend yield performance.

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  • ERF has successfully enacted a debt-reducing business transaction. CEO Kerr has highlighted the financial flexibility the deal provides the company. Providing cash to pay down debt only opens opportunities for the future. The property was primarily non-operated leases in the lucrative Marcellus area. The deal is expected to officially close at the end of June, but all signs point to a successful debt pay down.
  • ERF pays approximately 60% of cash flow to investors. The regular checks are a bellwether of Enerplus's history and culture.
  • Based upon a 19-cent per month dividend, this equates to an annual distribution per share of $2.28. ERF common is trading at approximately $31 per share. The annual yield is approximately 7.3%.

4. Pengrowth Energy Trust (NYSE:PGH)

PGH is a long-time player in the Canadian natural resource sector. Operating out of Calgary, PGH is known as a reliable and consistent performer. Perhaps the name does not receive the accolades or the press of a Baytex or Enerplus, but the monthly dividends continue to assuredly arrive. Reliability and long-term viability are PGH attributes which the investor can not discount. In addition, the primary currency is Canadian which can serve as a geopolitical savior assuming the U.S. currency is impaired due to the U.S. debt and U.S. deficit levels.

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  • Monthly dividend: PGH pays a monthly dividend of 7.2-cents per share. This equates to 86.4-cents per common share. Based upon a $12.73-share price, this is a 6.8% annual dividend yield.
  • The dividends are paid on the 15th of each month. The regularity has been in motion since July 2004. This is 7-years of constant monthly dividend distributions.
  • PGH's operations are primarily in the Western Canadian Sedimentary Basin.
  • PGH has approximately 200-producing properties. In addition, PGH has 860,000 acres of undeveloped land.
  • PGH has a 12.1% rate of return over the last 10-years, which is impressive vs. the SP500. The dividend growth has been achieved by continuing to develop new properties, and add to existing production wells.

5. Provident Energy (PVX)

Provident is a Calgary based company with premiere midstream assets. These properties include natural gas extraction, fractionation, storage, transport, and storage. The transport is across North America. Midstream typically implies a lower beta versus the typical energy and production company. PVX's annual dividend yield does reflect the decreased risk of loss of capital, via a lower annual distribution yield.

Provident has been busy raising convertible debentures cash proceeds. The funds are forecast to be used to pay down the outstanding 6.5% convertible debentures due August 31, 2012.

  • The asset base is truly a North America area. The business model ranges from Western Canada to southern Texas. This is truly a North American business enterprise.
  • The revenues are stable iwth storage and transport being predictable free cash flow businesses. The company wisely uses debt to its advantage and ensures to close out expiring debt when given the opportunity.
  • The quarterly dividend is 4.6-cents per share. This equates to a 5.52% annual yield. The 200-basis point discrepancy versus the ERF and BTE business model is due to the predictability of the storage and transport business model.

The astute investor can find a 6-7% annual dividend level by focusing upon the premiere energy related companies in the North American area. These companies provide monthly distributions and have done so during the Canadian Royalty conversion process, during the 2008 financial meltdown, and through present day.

Don't let a monthly dividend persuade you into thinking these are bond-like securities. These stocks and management teams are built upon being opportunistic and up to the challenge of providing total shareholder return.

Disclosure: I am long AT, BTE, ERF, PVX, PGH.