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A worker walks past the wellhead at a hydraulic fracturing operation near Bowden, Alta., Tuesday, Feb. 14, 2012. (Jeff McIntosh/Globe and Mail)
A worker walks past the wellhead at a hydraulic fracturing operation near Bowden, Alta., Tuesday, Feb. 14, 2012. (Jeff McIntosh/Globe and Mail)

Schizas’ Mailbag

Sanctity of Pengrowth Energy dividend not guaranteed Add to ...

Lou,

Can you tell me if the dividend is safe with Pengrowth Energy Corp.? Do you think when the price of natural gas moves higher the stock can get back to $11 or $12?

Dean

 

Hey Dean,

Thanks for the assignment. Pengrowth Energy Corp. (PGF-T) has just closed a business combination with NAL Energy Corp. that will up production, lower costs and increase the tax pools that will allow it to pay no income tax until 2015. Not a bad deal when you look at all the moving parts.

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The sanctity of the dividend is never a guarantee. If you want a guarantee of a dividend you have to look for preferred shares that meet your needs. Management does not provide guidance on their dividend policy. Admittedly its hard to ignore an 11 per cent dividend yield. A review of the charts will surface more of the information you need to make a decision on your investment.

The three-year chart is a gut-wrenching tale of loss. The shares topped out in April 2011 at close to $14.00 and it has been in a downtrend ever since.

Every attempt to move higher has met with resistance along the 200- and 50-day moving averages and there is a death cross that surfaced in June 2011. It’s these kinds of stories that make me want to leave the light on at night.

The six-month chart provides a good view of the resistance the stock has been encountering along the 50-day moving average. There is support that has come in at $7.00 but I would expect resistance to come in at $8.00 and then at $8.50. It’s a good trade but hoping to work your way back to $11.00 may take more time.

The RSI and MACD are both indicating a move higher but at this point it is from a very oversold position. There has been quite a bit of talk about a rebound in natural gas prices as producers start to shut in some of their wells and decrease the pace of drilling.

We are seeing an interesting pattern develop on the charts for natural gas but there are still a few more questions that need to be answered. No doubt an increase in the price of natural gas will lift all the boats.

I am the get-in-late-and-leave-early type, so I’ll wait for few more indicators to surface.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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