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moneysense.ca, 18/10/05
Searching for Dividends in the Oil Patch
Since dividend yields in the Canadian energy sector are puny, investors should look elsewhere.
The Dividend Guy is looking for dividend payers in the Canadian energy sector and finds that apart from Enbridge (TSX: ENB) (which is really a utility), you need a microscope to find the puny dividends paid by the big oil companies. Check out the current dividend yields of some of the companies:
Petro-Canada: 0.40%
Imperial Oil: 0.90%
Shell Canada: 1.03%
Encana: 0.57%
Suncor: 0.38%
Pretty underwhelming, huh? Now, let us check out the yields and growth rates of some of the US-listed oil majors:
Exxon-Mobil: 2.1%
Royal Dutch Shell: 3.7%
Total SA: 3.2%
BP: 3.3%
From a yield perspective, US-listed energy companies might be a better buy.
moneysense.ca, 18/10/05
Thanks for the mention. I have done some further investigation into a couple of the Canadian players and as another commenter commented, the low yields seem to be a direct reflection in a real jump in price over the past few months. Price is a very important consideration and I am going to hold off some more.
As for the US players, I will need to look at them more closely, but yes it does appear that they are better priced.
The problem with purchasing the U.S. companies is the inherent exchange risk……if you believe the U.S. dollar is going lower nd the Canadain dollar higher any exchange risk will be greatly outway the higher dividend
You are right. Almost every senior energy producer has quadrupled in price over the past 2 years. Holding off on buying them seems very wise to me.
doctoth: I disagree. Oil companies derive profits from a commodity that is priced in USD. Profits of foreign energy producers are significantly affected by exchange rates (expenses in local currency, selling in USD).
Even if we assume that the C$ reaches par, an appreciation of 17% from here, BP’s yield will go down to 2.7% (from 3.3%). Not too shabby.
Also, note that BP is increasing dividends at a 7% annual pace over the past 5 years. Over the long term, I really like those odds.
If the CAD increases 17% without a corresponding rise in the stock price of 17 % you lose capital….actually with exchange costs and commisions the stock would have to increase 21% to keep pace.
Wow those dividends do look low, although I’m sure there is a reason why that is beyond me.
You tease me with your new domain, but it’s not up yet! Be careful not to endure what Hazzard had to go through…
didn’t link the post correctly.
Check out Huskey – HSE (TSX) the dividends are best of all canadian oil stocks