Parkland Fuel appears to have more to give

Hi Lou,

Do you think Parkland Fuel still has some upside?

Is there a chance that they will raise their dividend since they are having a good run?

Any thoughts are appreciated.

Thank you,

David

Hey David

Thanks for the assignment. Parkland Fuels Corporation markets and distributes fuel to non-urban commercial and retail clients across Canada. Whenever I hear "non-urban" I hear pricing power and limited competition. The 7.4 per cent dividend speaks to their regional focus and strength.

A review of the charts will provide some guidance as we go further into 2012.

The three-year chart paints the picture of a stock that got dumped in the August panic of 2011 which set up a buying opportunity for investors who followed the old adage of being a buyer when there is blood in the street.

The MACD and RSI both signaled the move off the October 2011 lows. Currently the momentum indicators are indicating that perhaps the shares have gotten ahead of themselves. Once the shares broke above resistance at $12.00 it set up a run to the all time high of $17. There does appear to be a flag and pennant formation that started to form in early February 2012. A flag and pennant is a continuation pattern suggesting that the current advance has more to give.

The six-month chart provides another point of view on the shares. The MACD and RSI both look to be turning higher suggesting that we could expect a bounce off the 50-day moving average. If PKI moves through $14 there is not much to hold it back from $17. As far as an increase in the dividend I can't say. It is already a generous stream of income in the current environment. If it pulls back it only makes the dividends juicier!

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