Alok Swain

Penn West: A Slightly Expensive Replacement for Harvest Energy

Hi Trace Mayer,

I am also in the same position. Own HTE currently and am dissapointed with the acquisition. I thought the CDN $10 is way too low. This company not too long back was trading for CDN $20. Would have at least expected anywhere above CND $15-20 range.

And I am also in the same position that if this merger goes through, I have to redeploy the cash that I get from it. I think PGH is a better bet than PWE. The yields are higher. What are your thoughts on that.

Thanks

Alok

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

1) Although I agree in general with the main theses of this article
a) Diversify your dividend income sources.
b) Look for sustainable dividend yields not just large dividend payouts.

2) But I have to agree with BrunoT here, Canroys today at the prices they are trading for, are a steal. We are going to kick ourselves in a couple of years for not buying those at current prices. Higher oil prices in the future are virtually a certainity. The longer the oil remains flat at this level, the bigger would be the explosive move upwards in the future. And I think today Canroys are the best way to make that bet on Oil and get paid monthly at double digit taxable yields (almost 9-10% or so after you deduct 15 % foreign witholding tax) while you are waiting for that to happen.

3) As I look at the Canroys today at the current prices, say around ($4.80 for HTE) or ($4.50 for PVX), I would say they have the best feature of (convertible bonds + warrant on OIL prices) without the negative of each.

4) And to see those Canroy dividends being credited in my account every month (which I always look forward to) I feel like crying out loud like Jim Cramer... Kaching Kaching... :-))

Disclosure: Long (HTE & PVX)


On Apr 29 10:10 AM BrunoT wrote:

> For god's sake someone edit this columns to elminate the ones by
> those who know little more than the guys around the coffee machine
> at work.
>
> Even after severe drops in dividends after oil prices crashed late
> last year (not because unit/stock prices dropped, that is not a factor
> in dividends) a 10-20% dividend is still light years ahead of anything
> else. And when oil rises back (it's already way up from the lows
> earlier this year) the dividends will rise again.
>
> Do you seriously think that during a major depression that may last
> years your stocks will have real inflation adjusted gains equal to
> that? Insanity.
>
> You also failed to mention that when the dollar drops in value soon
> and the canadian dollar doesn't, those dividends will get a multiplier
> effect from the currency exchange that could add significantly. Or
> that when US oil stocks get hammered with "excess profit" taxes by
> a democrat congress as oil prices rise, Canadian ones may not. <br/>
>
> And finally, the unit price of these canroys is 1/3 what it was less
> than a year ago, and dividends have already been adjusted to the
> lower price of oil. Even if oil halved again they could STILL pay
> out more than the stocks you listed above. But what if oil returns
> to even $120/bbl? They double in unit price AND dividends are raised.
>
>
> I have some PWE purchased that yields me almost 30%. And the unit
> price is up over 50% since I bought it a few months ago. So stick
> that in your pipe and smoke it, "expert".
>
>
>
> How hard is that simple concept to understand?

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

To hold Canroys in the IRA is a bad idea, hold in an ordinary taxable account and get tax credits on those 15% foreign witholding taxes.


On Apr 29 11:20 AM huangjin wrote:

> The other thing to consider is taxes. Some royalty trusts sent out
> a K-1. Some investors recapture Canadian witholding of taxes on their
> dividends, while others forego the recapture and avoid the tax headaches
> by holding the stock in an IRA.
>