Tuesday, August 24, 2010

Arc Energy Trust

I never owned this stock (TSX-AET.UN. It is a Canadian oil and gas stock, which pays distributions based on commodity prices. This sort of stock can pay very good dividends when the prices of commodities are high. The problem is that dividends will fluctuate. If you cannot take a fluctuating income, this may not be a stock for you. However, if you can live with the fluctuations, you can do very well in dividend income.

Last year was a decidedly bad year for this company. Most of the growth figures are low as the company suffered a 43% decline in revenues and a 52% decline in cash flow. Distributions also suffered the same decline as the cash flow. Although, this company has are some very good growth figures. The best growth is in total returns, which for the past 5 and 10 years, are 14% and 26% per year, respectively. The portion of this return that is dividends is 12% and 17.7% per year for these periods, respectively.

The book value growth is so so, but the Return on Equity, expect for 2009 has been good. The 5 year average is 19.6% a very good figure indeed. When looking at the Liquidity Ratio, it is usually low and currently is at 0.93. However, the Asset/Liability Ratio is always strong and is currently at 2.94. This also is very good.

I will look at what the analysts say about this stock tomorrow. At this point, I would like to repeat that it is a good stock for you only if you can stand for the fluctuations in dividends. Also, the number of shares increases each year due to their dividend reinvestment program. This is a program where you can use your dividends to acquire shares. (This is not the only reason for increasing shares, but it is a significant one.)

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

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 for stocks followed and investment notes. Follow me on twitter.

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