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воскресенье, 31 мая 2020 г.

Invest $1,000 in This Oil Stock Today to Profit in 2021

Timor Invest

Canadian oil stocks are under considerable pressure. Oil’s sharp collapse, which saw West Texas Intermediate (WTI) plunge into negative territory for the first time ever, is hitting the energy patch hard. While the immediate outlook remains gloomy, this has created an opportunity to acquire quality drillers at once in a generation prices.

One oil stock that stands out is Frontera Energy (TSX:FEC). The driller, which emerged from the bankruptcy of Pacific Exploration and Production, has lost 64% since the start of 2020. This is significantly greater than the 55% decline of the international Brent benchmark price.

While there are plenty of headwinds ahead, there are signs that Frontera is very attractively valued, making it a speculative buy for contrarian investors betting on higher oil.

Why invest in oil stocks?

A key advantage of investing in oil companies rather than oil is their levered exposure to the price of crude. This means that when oil plunge their price decline, like Frontera’s, typically exceeds that of benchmark oil prices.

Conversely, when oil rallies it means they generally experience far greater gains than oil, meaning they can deliver outsized returns to investors.

Key is identifying those upstream oil producers that possess quality assets and strong fundamentals, allowing them to weather the current crisis.

Quality oil portfolio

Frontera owns a diversified quality portfolio of oil assets across South America, with its main producing acreage located in Colombia. This not only gives Frontera a handy financial advantage by allowing it to access Brent pricing, which trades at a premium to WTI, but benefit from lower operating expenses.

As a result, Frontera reported a credible first-quarter 2020 operating netback of US$16.21 per barrel of oil sold. The driller’s ongoing push to reduce operational costs and shutter non-economic production will keep its operations cash flow positive. That will be aided by Colombian government initiatives to reduce pipeline transportation costs.

Solid fundamentals for an oil stock

One of Frontera’s key strengths is its considerable liquidity and solid balance sheet. It finished the first quarter with US$265 million in cash and another US$30 million of restricted cash. This gives Frontera considerable financial flexibility, positioning it to emerge from the latest crisis relatively unscathed.

Importantly, Frontera has a very manageable US$364 million of long-term debt and lease liabilities. There are no debt repayments due until 2023, giving Frontera considerable breathing space to overcome the current crisis.

What makes Frontera a top oil stock to buy (aside from its solid balance sheet and quality assets) is that its shares are on sale. The driller is trading at a deep discount to the after-tax net asset value of its proven and probably oil reserves.

At the time of writing, Frontera’s price of $3.55 per share is less than a third of its $11 per share after-tax net asset value. This highlights the considerable potential upside available when oil firms and Frontera’s stock rallies.

Foolish takeaway

Frontera has long failed to unlock value from its oil assets. Finally, toward the end of 2019 it had resolved many of its legacy issues and was on track to reward investors, but this was derailed by the latest oil price collapse and coronavirus pandemic.

Nonetheless, Frontera will survive the current crisis. As oil prices rally higher, it will deliver considerable value for shareholders during the second half of 2020.

Looking for bargain stocks that could deliver outsized returns?

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Fool contributor Matt Smith has no position in any of the stocks mentioned.

The post Invest $1,000 in This Oil Stock Today to Profit in 2021 appeared first on The Motley Fool Canada.

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3 Dividend Must-Have Investments

Timor Invest

Generating a stable income for retirement is one of the primary goals of any investor. In order to accomplish that goal and remain diversified, investors should invest in a multitude of stocks across a broad section of the market. Here are some income-producing investments that should be income must-haves for nearly any portfolio.

This is a dividend must-have

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is neither the largest or the most well-known of Canada’s big banks. It is, however, a well-diversified bank with a handsome dividend and plenty of growth potential.

When it comes to international expansion, Scotiabank opted for the Latin American nations of Mexico, Chile, Columbia, and Peru. In contrast, nearly all of Canada’s other big banks opted towards expanding into the areas of the U.S. market. That’s not to say that Scotiabank didn’t expand elsewhere — it did, but the focus was on those four nations.

Those four nations are part of a trade bloc known as the Pacific Alliance. By expanding throughout those nations, Scotiabank has effectively become a familiar face to do business across the region. This has led to impressive growth during earnings season, also fueling the strong growth of Scotiabank’s attractive, must-have dividend.

Scotiabank currently offers a quarterly distribution every January, April, July, and October that works out to a handsome 6.28% yield.

A solid, stable utility

Few investments can offer the defensive peace of mind that Fortis (TSX:FTS)(NYSE:FTS) has. Fortis is one of the largest utilities in North America with a diversified portfolio of regulated facilities that is scattered across the U.S. and Canada.

One of the main benefits of investing in a utility stems from the business model itself. Utilities provide a regulated service in exchange for a recurring revenue stream. The terms of those agreements are set out in regulated long-term agreements that can span decades. That stable and recurring revenue stream leads to handsome dividends for investors.

Fortis offers a quarterly dividend that currently works out to a respectable 3.58%. Additionally, Fortis boasts well over four decades of consecutive annual bumps to that must-have dividend. This is something that few companies can offer, and Fortis remains committed to continuing that trend.

Fortis provides that handsome quarterly distribution every February, May, August, and November.

Your cell phone can make you rich!

Telecoms represent one additional area to consider. BCE (TSX:BCE)(NYSE:BCE) in particular operates one of the largest wireless networks in Canada as well as a vast media empire. That media segment includes TV and radio stations as well as an interest in professional sports teams.

BCE’s wireless segment is what investors should be most excited about. Wireless connections have evolved in the past decade from communications devices to become a must-have of our digital life. In short, an endless array of new data-hungry apps and devices provide a recurring revenue stream for BCE and in turn, a generous dividend.

BCE’s quarterly dividend currently works out to an appetizing 5.91% yield. Apart from the growing necessity of wireless connections, worth noting is that BCE has been paying dividends for well over a century. In other words, this makes BCE an incredibly stable investment to make for any portfolio of dividend must-have investments.

BCE has distributions in March, June, September, and December.

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Fool contributor Demetris Afxentiou owns shares of Fortis Inc. and The Bank of Nova Scotia. The Motley Fool recommends BANK OF NOVA SCOTIA.

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Goldman Scandal, BTC Bull Trap Fears, How Libra Will Make Money: Hodler’s Digest, May 25–31

Timor Invest

Goldman Sachs attacks crypto, why Bitcoin may be wandering into a bull trap, and how Libra is going to make money.

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ALERT: 2 Super-Cheap Bank Stocks to Buy Today

Timor Invest

Investors have been treated to the second quarter of Canadian bank earnings in late May. Predictably, Canada’s top financial firms have been squeezed due to the COVID-19 pandemic. Provisions for loan losses have skyrocketed at top banks, but bank stocks have reacted surprisingly well. Bank stocks took another spill on Friday, which means investors may want to consider buying the dip. Today, I want to look at two bank stocks that offer monster dividends. Let’s dive in.

One regional Canadian bank stock that fell after earnings

Laurentian Bank (TSX:LB) is a regional bank based in Quebec. Its shares were down 9.39% in early afternoon trading on May 29. The stock has dropped 28% in 2020 so far. Laurentian released its second-quarter 2020 results on the same day.

The bank took major hits due to the COVID-19 pandemic throughout the second quarter. Adjusted net income plunged 76% year over year to $11.9 million and adjusted diluted earnings per share fell 81% to $0.20. Laurentian’s provision for credit losses increased to $54.9 million in Q2 2020. This is compared to $9.2 million in the second quarter of 2019. This increase was driven by higher collective allowances. However, net write-offs only climbed to 0.03% of loans compared to 0.02% in the prior year.

Shares of Laurentian Bank were trending toward technically oversold territory at the time of this writing. The bank slashed its dividend by 40% to a quarterly payout of $0.40 per share. This still represents a strong 5.6% yield. Quebec was one of the first provinces to push forward with its economic reopening. I like this regional bank stock as a buy-the-dip opportunity right now.

If you’re on the hunt for income, look to CIBC

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has boasted one of the best dividend yields of its peers in recent years. The fifth largest of the Big Six Canadian banks released its second-quarter results on May 28. Shares of CIBC were down 1.91% in early afternoon trading on Friday, May 29. The stock has dropped 15% in 2020 so far.

Like its peers, CIBC struggled mightily in the second quarter. Its second-quarter profit fell 71% year over year to $392 million. It reported adjusted earnings per share of $0.94, which fell far short of analyst expectations. Meanwhile, its set-asides for loans erupted to $1.41 billion compared to $261 million in Q2 2019. Regardless, CIBC remains confident in its path forward. The bank still boasts an immaculate balance sheet, making it well equipped to weather this financial storm.

Earlier this year, I’d recommended that investors look to buy CIBC at a discount. Bank stocks have been hit hard this spring, which has generated some attractive buying opportunities. Shares of CIBC last possessed a favourable price-to-earnings ratio of 9.7 and a price-to-book value of one. Moreover, the bank announced that it would maintain its quarterly dividend payout of $1.46 per share. This represents a tasty 6.5% yield.

Bank stocks are not the only great option for investors right now…

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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned.

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Forget Air Canada (TSX:AC) and Airlines: Buy This 1 REIT Stock Instead

Timor Invest

The coronavirus pandemic pulled the rug out from under airline companies. Air Canada (TSX:AC) was one of the TSX’s stellar performers in 2019 and the past decade. This year, however, Canada’s flag carrier is operating on less than 10% capacity and doing cargo flights only. Pretty soon, the stock price could drop to below $10.

If you have the appetite to invest, cast out airline stocks and consider Summit Industrial (TSX:SMU.UN) instead. This real estate investment trust (REIT) will deliver high, not zero, returns.

Fading glory

Air Canada’s first-quarter 2020 earnings results were understandable. Business screeched to a halt when the government announced border closures and travel restrictions. COVID-19 paralyzed domestic and international air travel.

Air Canada was down on its knees. The impact of the health crisis is so devastating. After 27 consecutive quarters of year-over-year operating revenue growth, the company is suddenly looking bankruptcy in the eye. Its operating loss ballooned to $433 million versus $127 operating income in the same quarter in 2019.

Apart from the significant financial damage to the company, 16,500 employees lost their jobs. Fortunately, the displaced workers will remain on the payroll from March 15 to June 6, 2020. Air Canada availed of the Canada Emergency Wage Subsidy (CEWS) to make rehiring possible.

The latest from Air Canada is the launching of a public offering for about $500 million worth of Class A and Class B voting shares. The company hopes to raise $1 billion to bolster its cash position and provide more flexibility to manage the health crisis.

Booming REIT

In contrast to Air Canada, Summit Industrial reported solid operating and financial performance for the first quarter (ended March 31, 2020). This $1.3 billion REIT had sterling results in crucial metrics compared with the same period in the prior year.

Revenue increased by 37.7%, while the occupancy rate was 98.4%. Summit’s average lease term is 5.3 years, with 1.6% annual contractual rent escalations. Because of the increase in revenue, operating growth, and robust operating performance, net rental income grew by 39.6%.

The focus of Summit is light industrial and other properties. It has nine newly-acquired light industrial properties with a total leasable space of 746,903 square feet.

Summit paid $43.6 million in maturing mortgage debt and secured a new $300 million unsecured revolving credit facility to be more financially flexible. The available cash-on-hand is $200 million, while its pool of unencumbered assets is worth $635.3 million.

Unlike Air Canada, Summit is generating revenue despite the pandemic. The REIT was able to collect about 96% of rent due in April, and around 87% of May rents to-date. Some tenants signed rent deferral agreements.

The record results tell you that Summit Industrial is a screaming buy. You can be a quasi-landlord by purchasing this REIT at $10.31 per share. But the real takeaway is the 5.45% dividend yield.

Different futures

Air Canada will be away from the limelight in 2020. A near-term comeback is close to impossible. Summit Industrial would see growth with the rising demand for industrial properties. Logistics companies and e-commerce retailers will need more delivery take-off points.

Speaking of Air Canada’s future…

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