Thinking about going long on Eagle Energy Trust

[From The Hip]

Since the BIG shakeup with energy trusts on 10/31/06 the market tanked in general though if you were positioned right it was a buying opportunity with massive upside potential.

After the new tax rules were brought in a few start ups began and Eagle Energy Trust is one of them.All assets are held outside of Canada(strictly USA) and Corporate tax is paid in the USA.Much like the old ET's dividends are paid monthly and taxed as per Canadian taxation but under the SIFT rules that were introduced.

The share price is allmost at an alltime low and the dividend is .088 per share per month and it has been paid since inception even when the price of oil was at a low of $40.

I can throw $30,000 at this via my TFSA and not have to pay a dime in taxes and at the same time get rewarded for upside potential in the stock price.

Thoughts please.

FTH

[Deer Hunter]

What other oil levered income stories have you compared this against?

[From The Hip]

What other oil levered income stories have you compared this against?

I have not compared it to anything.All told I can buy 5300 shares and have the monthly dividend roll over in the DRIP program to the tune of close to $500 per month with it compounding and getting an extra 5% for reinvensting the dividends.You dont get those returns on GIC's or savings bonds.

FTH

[Sushi]

$1 per year divvy on $6 share? Not sustainable unless the earnings come up. The PE is very high. They better be expecting to show stellar Q2 results coming right up. They have a low debt load to their benefit. Analysts show hold, rather than buy or strong buy. Definitely some risk here by the looks of things. The trend is down. Looks like it may go lower, unless Q2 is a barn burner.

I'm just saying this after a quick peak at globe investor, I haven't followed this business. What do you know about the management? Do they know their stuff? Do you have faith in them?

[From The Hip]

$1 per year divvy on $6 share? Not sustainable unless the earnings come up. The PE is very high. They better be expecting to show stellar Q2 results coming right up. They have a low debt load to their benefit. Analysts show hold, rather than buy or strong buy. Definitely some risk here by the looks of things. The trend is down. Looks like it may go lower, unless Q2 is a barn burner.

I'm just saying this after a quick peak at globe investor, I haven't followed this business. What do you know about the management? Do they know their stuff? Do you have faith in them?

I think the management team knows it's stuff.The compnay got off the ground through an IPO that was over subscribed on their business plan and with no assets to speak of.The IPO bought the assets.Since inception the monthly dividend has been paid each and every month.A big factor is that 65% of shareholders are enrolled in the DRIP plan which feeds the company but at the same time a person has to look at the time to get out.

On $30,000 I would be getting just shy of $500 per month in dividends that would be reinvested via the DRIP plan and compounding the dividends with 5% added per month for compounding.

All in all it beats the crap out of anything the banks or the government can offer vis-A-vis GIC's/savings bonds etc.

FTH

[Sushi]

The dividends are not for certain, just remember. You sound over confident. Maybe buy only 1000 shares to start.

[roper1]

Nothing personal but if you still have that much room in your TFSA, you need a better adviser than your current one or us guys.

[Sushi]

The dividends are not for certain, just remember. You sound over confident. Maybe buy only 1000 shares to start.

I read the Q1 report. I am only an amateur at best. I wouldn't recommend buying any at this time. Dividend is too rich and hampering their ability to grow.

If they cut the dividend and announce growth plans, then reconsider and buy some.

[79ford]

drip with a massive dividend and no growth is a recipe for stagnant or declining returns.

Drip is actually paying investors with shares as opposed to buying out of the float which means dilution of value.

[benamen]

Nothing personal but if you still have that much room in your TFSA, you need a better adviser than your current one or us guys.

He may have other investments in his TFSA which he could liquidate to fund the purchase. He just said he had $30,000 he could throw at it. The max amount that can be contributed to the TFSA is $31,000 at this time. Upside to purchasing equities in a TFSA is that there is not tax to pay on the gains at anytime. Downside is that if you experience a loss, you cannot claim the that loss anywhere.

[roper1]

He may have other investments in his TFSA which he could liquidate to fund the purchase. He just said he had $30,000 he could throw at it. The max amount that can be contributed to the TFSA is $31,000 at this time. Upside to purchasing equities in a TFSA is that there is not tax to pay on the gains at anytime. Downside is that if you experience a loss, you cannot claim the that loss anywhere.

Iirc I don't think he can liquidate all & replace all in same calendar year so he wouldn't be allowed all out, all in without quite a penalty, I believe. I am well aware of tax breaks, I maximize Jan 1 every year. I could stand to be corrected if I am wrong on the all-out, all-in deal. I would definitely diversify inside my TFSA & just go straight non-registered if I was to buy a chunk of one equity $30,000. IMO

[benamen]

To own equities , specifically stocks, you need to have a self directed TFSA. Inside this account you can sell and buy or sell and leave in cash any of your investments. You cannot deregister any of your contributions and recontribute that same amount in the same calendar year. Some guys would put the whole Mount into one investment as they are not PLANNING to purchase anything to lose money.

[roper1]

I think I am on the same page, he can't sell what he currently has in there down to zero then load up on Big Eagle in the same calendar year ?? My TFSA is long term, I do my individual stock picks in a non-registered. It does allow capital losses to offset some capital gain. Dividend & interest cash go RRSP to defer tax. Not sure of the strategy but watching 3 different piles grow is fun.

[benamen]

I think I am on the same page, he can't sell what he currently has in there down to zero then load up on Big Eagle in the same calendar year ?? My TFSA is long term, I do my individual stock picks in a non-registered. It does allow capital losses to offset some capital gain. Dividend & interest cash go RRSP to defer tax. Not sure of the strategy but watching 3 different piles grow is fun.
Deregister is the main term to be aware of. It is when you deregister and have the proceeds sent to you that you cannot replace in the same calendar year. Same as a self directed RSP. Do anything inside of it you want, but you are only charged tax when you deregister an amount from the account.

[From The Hip]

I am looking at throwing $30,000 liquid cash INTO my TFSA which is self directed and buying into Eagle Energy Trust with the main goal of the monthly dividends self compounding via the DRIP program for a long term time of 10 years.Let the greedy little monster feed itself and compound over and over each month without getting hit with stock purchase fees.


As for the comment about my lack of direction/lack of decision with regards to my TFSA....sorry dude...I was busy paying off my mortgage in 10 years whilst at the same time completely renovating my home and collecting sports cars/playing a ton of golf and collecting miniature firearms.....as well as a few other frivilous go for broke things as I hit middle age crazy early.

For the dividends Eagle Energy Trust seems pretty good and you cant bash the distribution record....4 years of the same monthly dividend seems pretty solid to me.This is not some flash in the pan idea of throwing $30,000 on something like Bre-Ex and chasing the money as the stock sht through the roof only to get shafted a week after the head geologist took a header out of a helicopter over Indonesia.

FTH

[roper1]

Certainly no offense intended, you asked a financial question, not a lifestyle one. 9 times out of 10, you will have been farther ahead with your TFSA already topped up rather than swinging for the fence with just one stock. IMO.

[Deer Hunter]

Is the eagle management buying their own stock on the recent price weakness?
Do they own a lot of it?
Sometimes these can be good indicators.

[79ford]

hmmm, 9 cents per share in earnings and they pay 9 cents per share dividend every month....


This company spends 1200% more than they earn on the dividend and the stock has been on a steady trajectory down its whole public life. Recent weakness is probably pricing in a dividend cut aswell as bad earnings. They would probably have to cut the dividend before having a hope of their stock ever going up and it will be alot of pain and selling between cutting and getting into growth after wracking up monstrous debt paying a dividend than exceeds its earnings by 12 times.

[dumoulin]

This is Chinese to me.... But are you saying there is potential to make extra mony to buy guns??? That makes sense to me!!!

[dmac]

P/E ratios are not great nor are the company financials. Current dividend yield looks great at ~16.0 percent. Probably not sustainable. If dividend is reduced, stock price will fall by corresponding value. Stock has under performed the TSX by a lot. That said, if you can afford it, I would risk some, not all of the 30 K$ on this one. Maybe someone buys it. Its getting closer to the magical b/day production number which makes it an attractive target.

I would have a look at Long Run. Much better financials, production numbers, balance sheet and a sustainable monthly dividend.

My 2 cents.

[WZHunter]

P/E ratios are not great nor are the company financials. Current dividend yield looks great at ~16.0 percent. Probably not sustainable. If dividend is reduced, stock price will fall by corresponding value. Stock has under performed the TSX by a lot. That said, if you can afford it, I would risk some, not all of the 30 K$ on this one. Maybe someone buys it. Its getting closer to the magical b/day production number which makes it an attractive target.

I would have a look at Long Run. Much better financials, production numbers, balance sheet and a sustainable monthly dividend.

My 2 cents.

The yield is misleading. When the price was $12/share in 2011, yield wasn't as great at 8.5%. If this sucker drops to $0.50/share, the yield will look stellar at 200%. Down side is you lost all your initial investment! :sign0161: The downward trend since inception scares me.

Check out Freehold Royalty Trust. Long track record of solid distributions. You won't get great long term capital growth, but you will realize some good long term distributions.

[The Elkster]

If payouts are funded by stock dilution and effectively cannibalizing the company value then they aren't sustainable. The only sustainable distribution would come from PROFITS after sufficient capital is invested to maintain the value of the business and your principle...or if you have a good Ponzi scheme going. Forget about just one aspect and focus on the whole company. If everything on the balance sheet doesn't make sense and look good then it is not a good investment regardless of what some fast talking company exec spins. The fact that distributions have been made up to now is irrelevant. Lots of people make money in Ponzi schemes too. Distributions won't mean squat if your principle goes to zero.

If I fart then tell ya you should be smelling roses should you listen to me or your nose?

[From The Hip]

As I said I was "thinking of going long" on this stock but I was not 100% sold on it.I do want to invest the 30 grand.I worked hard for it and now I want it to start working for me if you know what I mean.At the same time I dont want to see it flushed down the toilet.My other plan is to wait for a signifigant market correction and buy some good blue chip stocks after the silly people have pushed the price down via panic selling though I doubt I will ever see the opportunity to purchase 30 grand worth of Tech Resources stock for $3.35 a share like in 2008/2009.

Like I said there are some very valid points made and I appreciate the insight.

FTH

[waterninja]

really don't know much about what a lot of you guys are talking about, but i do wonder what will happen to the entire oil industry when justin trudeau becomes PM. wouldn't surprise me if he guts western canada like his dad did.