Wednesday, January 21, 2009

Arc Energy Trust

I have recently been reading all I can find on the new Tax Free Saving Accounts (TFSA) and one suggestion I found interesting was the recommendation to put a stock like Arc Energy Trust (TSX-AET.UN) into your TFSA. This makes sense to me as most of the distributions from this trust are Taxable Income and so it is not very tax efficient for holding outside an RRSP or TFSA accounts.

This first thing I should say about this stock is that it is in the Oil business, so its distributions can vary depending on the price of oil. And, if you look at current distributions, they have just come down. However, people have made good money over the years from this trust stock.

All my following figures are for the year ending at the last annual statement of December 2007. The revenue growth for the last 5 and 10 years was 23% and 35%. The 5 and 10 years growth for Earnings per Share (EPS) was 32% and 20%. The 5 and 10 year figures for cash flow are 13% and 11%. The total return for the closing price for the last 5 and 10 years are 20% and 25%. These are all great figures.

The book value for the last 5 and 10 years are 6% and 1%. This are not great, but trust stocks tend to payout their earnings so there is not much room for book value growth. The liquidity of this stock is also low at .72, where the current assets cannot cover the current liabilities. These stocks tend to be like this, but in a bear market caused by a credit crunch, it is not good. However, the Asset/Liability ratio is a much healthier 2.30.

There are no stability ratings for this stock, but this must be considered to be a high risk stock as it is in the oil industry. Tomorrow, I will talk about what the analyst say about this stock.

Arc Energy Trust acquires and develops long-life low declining oil and gas properties in Western Canada. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on my web site.

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