Friday, October 9, 2009

Arc Energy Trust

I am reviewing this stock (TSX-AET.UN) today as I have updated my spreadsheet with the December 2008 financials and the 2nd quarterly financials. I do not own this stock. This is an income trust stock that I follow. They have also decreased their distributions this year.

As on a lot of income trust stocks, the growth figures are good for all items but the Book Value. Book Value for the last 5 years has only increased by about 2% per year. This is not great. Other figures are better. Take the Cash Flow from Operations. Over the last 5 and 10 year periods, the Cash Flow has increased by 13% and 12% per year. Until this year, the dividends have increased nicely. However, with the dividend cut in half.

Because this is an oil and gas stock, the dividend payments have fluctuated over the years. But if you look at how much the dividends have affected the total return, you will find that of the 20% per year total return over the last 5 years, dividends have been 13% of this return. If you look at a 10 year period, the dividends have increased per year returns by 21.7% to 30.4% per year. The total returns have been very good.

Turning to the Asset/Liability ratios, I find the A/L Ratio good and it has been at 1.50 or better. The average for the last 5 years is 2.43. However, the liquidity ratios are low and at the end of 2008 it was only 0.78. The Liquidity ratio again was as bit better in June 2009, but still it was at just 0.83. If this ratio is not at least 1.00, it means that the current assets cannot cover the current liabilities.

I have gone back to reviewing stocks I have not reviewed lately because nothing much is happening in the stock market. I was hoping for a good pull back this fall. It has not happened yet. You can make some good money in oil and gas stocks like this one. However, you have to be prepared for the fluctuation in dividend payments. If you cannot handle that, you should not invest in oil and gas stocks.

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.

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