Yesterday felt like my birthday… Well it actually felt better than my birthday. I have to confess. I am an addict…. I addicted to owning solid dividend growing companies and holding them forever. Haha… Yesterday, I purchased 4 companies stocks on my watch list. Yay~~!
Oil price as well as oil companies took a hit during last week and I couldn’t pass great buying opportunities of dividend stocks that are on my watch list. I love the short term declining volatility as I am confident that the overall market will eventually recover and be better. I have no idea where the oil prices will go and so many professional analysts won’t know either. I never time the market. I just look through the companies that are on my watch list when I have some capital to deploy then purchase them when their current prices seem attractive.
The first stock that I purchased yesterday and will introduce you today is Ensign Energy Services Inc (ESI). I purchased 270 stocks at $9.60. Many of you may be thinking… “What is this company? I thought you said you purchased solid dividend growing companies stocks. I expected that you purchased may be one of those big 5 Canadian banks such as BMO, TD, RY, CM and BNS or other big names such as Fortis, Canadian utilities, Thompson Reuters, Enbridge Gas, Suncor, Telus etc…” I know ESI is really a small company (Market cap of only $1.5B) that you probably never heard of but it is a really strong Canadian dividend aristocrat. It has raised its dividend for last 20 years and EPS has been growing substantially over the years. It is priced very attractively in my opinion as the price to earnings ratio are around 11 and that triggered me in adding initial positions on it. Let’s dig a little deeper and you will understand why I purchased it.
Ensign Energy Service Inc (ESI) deliver various oilfield services such as drilling, well servicing, rental equipment, wirelines servicing, production testing in natural gas and crude oil industry in Canada, US and in the world. In Canada, it has operations in Manitoba, Saskatchewen, Northeastern BC, Alberta, Yukon, Northwest Territories, in US, it has operations in Montana, North Dakota, Colorado, New York, Ohio, Maryland, California, West Verginia, Pennsylvania etc… It internationally reaches to Argentina, Gabon, Libya, Oman, Venezuela, New Zealand, Kurdistan etc… Its market cap is $1.5B and has annual dividend of about 5%. Let’s take a look through the details and you will understand why I, as a long term passive dividend income investor, think Ensign Energy Service Inc is a strong contender.
1. Very well diversified geographically provides a great hedge against weakness in Canada.
2. It has increased its dividend from $0.1025 per share in 2002 to $0.4725 in 2014. That’s 460% increase during 12 years. It survived through various crash and constantly increased its dividend during that time and continued its growth over 20 years. Would it continue? I strongly think so.
3. Dividend yield of whooping 5% at current market price
4. Payout ratio of 57% which is quite high compared to all other Canadian dividend aristocrats but close to Canada’s biggest oil company Suncor (61%) pays out.
5. P/E ratio of 11 is very appealing. Considering its strong performance, it is seriously a bargain regardless where the oil price goes in the future
6. Currently traded in around $9.60- $9.70 mark which is 10 years low. This stock lost more than half of its value in the past 6 months.
7. It is proactively reacting to the outlook of oil prices. It lowered its planned 2015 capital spending by 35% down from $350 million to $220 million. Rigs that it planned to build decreased from 17 to 9. It also reduced executives pay by 10% and board of directors by 20%. Their 5 executives make only $1.73 million (about $350K per year each) annually which is very reasonable compared to Canada’s other top executive compensations.
1. Outlook for oil prices has declined even further since early December causing many of Ensign’s customers to slash their capital spending budgets for 2015 that would result some concerns in 2015 revenue of Ensign as reduced crude oil and natural gas prices have a direct negative effect on production companies’ cash flow.
2. The stock is in a downward trend and 2015 will be North America’s Oil companies one of the most challenging year.
3. It recently announced only 2% of dividend increase however considering this uncertain future oil prices, I will gladly take it.
This is probably a risky oil &gas investment for me and I can easily see that current uncertain time will make the stock price to fluctuate even more considering it being a mid-cap sized company but I am thinking it as a very long term investment and quite confident that the stock will do very well and increase its dividend substantially in the long term. I think Ensign Energy Service Inc is an excellent stock to buy and forget if you are a long term investor. My purchase of Ensign Energy Service Inc stocks will add $130 to my annual dividend.
What do you think about my purchase? Do you have more appealing stocks on your watch list? Have you enjoyed the post? Then share the post with your Facebook friends, like my Facebook page and subscribe your email on your right.
Happy birthday and Ensign is an interesting and risky pick. I am surprised by high dividend growth.
Thanks for the birthday wish Hahaha. Ensign Energy is clearly an interesting purchase with fairly great EPS growth combined with dividend increase over many years. I will keep my eyes on but I think this is one of buy and forget small cap investments.
Thanks for your comments TonesofLove.
I’m not sure if Ensign would be able to continue with the impressive dividend growth rate moving forward, consider the company is getting hammered by the low crude oil price. But at less than $3000 of investment I think this is worth the risk.
The earnings is just released today. 2014 Q4 is a bit disappointment however considering the current environment of low price of oil, I would take it. ESI has a great potential, it was really matter of when I would invest in it. As you said, less than $3000 of investment, I hope this is worth the risk. Thanks for the comments. Tawcan.