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A juicy dividend and turning sentiment makes Lightstream worth a look

PetroBakken says its name change to Lightstream Resources Ltd. reflects the fact that it’s not just focused on the Bakken region in Saskatchewan and North Dakota any more.

Gord Pitts/The Globe and Mail

Hey Lou,

I refrained from buying Lightstream Resources Ltd. as you suggested earlier. Can you give me an update and what may be wrong?

Thanks, Paul

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Hey Paul,

This will be the ninth time that I analyze the stock of Lightstream Resources Ltd. since January of 2011. The last time was on Feb. 1, 2013 on the assignment you tasked me with. The shares were trading for $8.80 and the research conducted on your behalf indicated that you would be best served not taking a position in what was then called Petrobakken Energy. What has plagued the company is the $2.1-billion debt that management strapped on. In late November of 2013 it was announced that LTS would reduce its dividend, sell non-core assets, and lower its capital expenditures. The news got investors hitting the silk, taking the stock down to a retest of the 2011 lows.

Another run at the charts will help identify how best to proceed from here.

The three-year chart provides a lot of information regarding the shares of LTS. There is an established downtrend line that has dominated the chart since April of 2012. In addition there is the death cross that formed in November of 2012, indicating that investors could expect selling pressure to endure. Finally every advance has met resistance along the 50- and 200-day moving averages. In concert these three patterns have alerted the astute investor to stay out of the way of this falling piano.

The six-month chart indicates that there has been some buying that started to come in as the shares hit the rock bottom of $5.06 in mid December of 2013. The MACD and the RSI both generated buy signals as the stock caught the bounce that has it testing resistance at $6.00. If LTS can move through $6.00 with conviction it can advance to $7.00 with little resistance.

Despite the reduction in the dividend in November the current yield is just above 8 per cent. If you still like the risk profile associated with this stock then now might be a good time to catch a ride.

Make it a profitable day and happy capitalism!

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