Month-to-month Dividend Inventory In Focus: Pine Cliff Power

Up to date on October ninth, 2024 by Aristofanis Papadatos

Pine Cliff Power (PIFYF) has two interesting funding traits:

#1: It’s a high-yield inventory based mostly on its 6.0% dividend yield.
Associated: Record of 5%+ yielding shares

#2: It pays dividends month-to-month as a substitute of quarterly.
Associated: Record of month-to-month dividend shares

You’ll be able to obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink beneath:

Pine Cliff Power’s mixture of a excessive dividend yield and a month-to-month dividend make it interesting to particular person traders.

However there’s extra to the corporate than simply these components. Preserve studying this text to be taught extra about Pine Cliff Power.

Enterprise Overview

Pine Cliff Power engages within the acquisition, exploration, growth, and manufacturing of oil, pure fuel, and pure fuel liquids within the Western Canadian Sedimentary Basin.

The corporate primarily holds curiosity in oil and fuel properties within the Southern Alberta, Southern Saskatchewan, and Edson areas, in addition to within the Viking and Ghost Pine space of Central Alberta. The corporate was shaped in 2004 and is headquartered in Calgary, Canada.

Pine Cliff Power produces oil and fuel at a ratio of 21/79 and therefore it needs to be thought of primarily a pure fuel producer. As a fuel producer, Pine Cliff Power is extremely cyclical as a result of dramatic swings of the value of pure fuel. Notably, the corporate has reported losses in 7 of the final 10 years and initiated a dividend solely in 2022.

However, Pine Cliff Power claims that it has some benefits when in comparison with the well-known oil and fuel producers.

First, the corporate claims that it has a good stability sheet (extra on this later), which is paramount within the oil and fuel business, as this business is characterised by fierce downturns each few years.

Supply: Investor Presentation

As well as, the administration workforce of Pine Cliff Power owns 14% of the corporate and therefore it’s aligned with the shareholders. This is a vital attribute, which shouldn’t be undermined by traders.

Furthermore, Pine Cliff Power has the bottom pure manufacturing decline price amongst all Canadian public producers. This reduces the quantity of capital bills required to maintain a given stage of manufacturing.

Identical to virtually all of the oil and fuel producers, Pine Cliff Power incurred losses in 2020 as a result of collapse of the costs of oil and fuel attributable to the coronavirus disaster.

Nevertheless, because of the large distribution of vaccines worldwide, world demand for oil and fuel recovered in 2021 and thus the corporate grew to become worthwhile in that yr.

Even higher for Pine Cliff Power, the Ukrainian disaster triggered a rally of the costs of oil and fuel to 13-year highs in 2022. Because of this, the corporate posted 10-year excessive earnings per share of $0.22 in that yr. It additionally initiated a dividend in June of 2022, after greater than a decade and not using a dividend.

Nevertheless, the value of pure fuel has slumped since early final yr as a consequence of abnormally heat winter climate for 2 consecutive years. This has resulted in exceptionally excessive fuel inventories in North America.

Because of this, Pine Cliff Power noticed its earnings per share collapse final yr, from $0.22 to $0.02. The corporate has additionally posted a marginal loss per share of -$0.02 within the first half of this yr.

Progress Prospects

As talked about above, Pine Cliff Power has the bottom pure manufacturing decline price amongst all Canadian public producers.

Supply: Investor Presentation

The pure decline of the manufacturing wells is paramount within the oil and fuel business, as excessive decline charges lead to extreme capital bills required to maintain a given stage of manufacturing. It’s thus evident that Pine Cliff Power has a major aggressive benefit when in comparison with its friends.

However, as an oil and fuel producer, Pine Cliff Power is extremely delicate to the inevitable cycles of the costs of oil and fuel. Extra exactly, as the corporate produces 79% fuel and 21% oil, it’s particularly delicate to the cycles of the value of pure fuel.

Due to the rally of the costs of oil and fuel to 13-year highs in 2022, Pine Cliff Power posted 10-year excessive earnings per share in 2022. Nevertheless, each costs have plunged off their highs in 2022. Because of this, the corporate is more likely to submit a lot decrease earnings per share this yr.

Given the extremely cyclical nature of the oil and fuel business but additionally our expectations for barely greater fuel costs within the upcoming years, we count on the earnings per share of Pine Cliff Power to develop by about 5.0% per yr on common over the subsequent 5 years, from $0.05 in 2024 to $0.06 in 2029.

Dividend & Valuation Evaluation

Pine Cliff Power is presently providing an above common dividend yield of 6.0%. It’s thus an fascinating candidate for income-oriented traders, however these traders needs to be conscious that the dividend is way from protected as a result of dramatic cycles of the costs of oil and fuel.

Pine Cliff Power has a ahead payout ratio of 80%, which is very excessive, significantly for the power sector. The corporate additionally has a good however considerably leveraged stability sheet, with web debt of $249 million. As this quantity is 94% of the market capitalization of the inventory, it’s manageable underneath regular enterprise situations.

Nevertheless, the stability sheet has weakened over the last 12 months. We additionally be aware that the present belongings ($25.2 million) have turn into decrease than the present liabilities ($50.3 million), that are due throughout the subsequent 12 months.

Total, the stability sheet has weakened in latest quarters and thus the corporate will probably be weak each time the subsequent downturn of the power sector exhibits up.

Furthermore, it’s important to notice that Pine Cliff Power initiated a dividend solely in 2022, amid multi-year excessive commodity costs. It failed to supply a dividend within the previous years, because it incurred materials losses in most of these years. Subsequently, it’s evident that the dividend of the corporate is way from protected.

In reference to the valuation, Pine Cliff Power is presently buying and selling for 14.6 instances its anticipated earnings per share this yr. Given the excessive cyclicality of the corporate, we assume a good price-to-earnings ratio of 10.0 for the inventory.

Subsequently, the present earnings a number of is way greater than our assumed honest price-to-earnings ratio. If the inventory trades at its honest valuation stage in 5 years, it would incur a -7.3% annualized drag in its returns.

Considering the 5.0% annual development of earnings per share, the 6.0% present dividend yield and a -7.3% annualized contraction of valuation stage, Pine Cliff Power might supply only a 3.8% common annual whole return over the subsequent 5 years.

It is a low anticipated return, which ends from the truth that we’ve handed the height of the oil and fuel business. The inventory is extremely dangerous proper now and therefore traders ought to look ahead to the subsequent downturn of the power sector earlier than evaluating the inventory once more.

Last Ideas

Pine Cliff Power is providing an exceptionally excessive dividend yield of 6.0%, which is 5 instances as a lot because the 1.2% dividend yield of the S&P 500. Because of this, the inventory is more likely to entice some income-oriented traders.

Nevertheless, the corporate has a excessive payout ratio of 80% and a weakening stability sheet. As well as, it has proved extremely weak to the cycles of the costs of oil and fuel.

As these costs appear to have peaked on this cycle, the inventory is extremely dangerous proper now. Subsequently, traders ought to look ahead to a a lot decrease entry level.

Furthermore, Pine Cliff Power is characterised by extraordinarily low buying and selling quantity. Which means it’s onerous to ascertain or promote a big place on this inventory.

Extra Studying

Don’t miss the sources beneath for extra month-to-month dividend inventory investing analysis.

And see the sources beneath for extra compelling funding concepts for dividend development shares and/or high-yield funding securities.