Monthly Dividend Stock In Focus: Pine Cliff Energy

Up to date on April tenth, 2025 by Felix Martinez

Pine Cliff Power (PIFYF) has a fairly distinctive, interesting funding attribute: it pays dividends month-to-month as an alternative of quarterly. There are solely 76 such shares at this time, an inventory of which yow will discover beneath.

Associated: Listing of month-to-month dividend shares

You’ll be able to obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink beneath:

Monthly Dividend Stock In Focus: Pine Cliff Energy

Pine Cliff Power’s mixture of a excessive dividend yield and a month-to-month dividend makes it interesting to particular person buyers.

However there’s extra to the corporate than simply these components. Hold studying this text to be taught extra about Pine Cliff Power.

Enterprise Overview

Pine Cliff Power acquires, explores, develops, and produces oil, pure fuel, and pure fuel liquids within the Western Canadian Sedimentary Basin.

The corporate primarily holds pursuits in oil and fuel properties within the Southern Alberta, Southern Saskatchewan, and Edson areas, in addition to within the Viking and Ghost Pine areas of Central Alberta. It was fashioned in 2004 and is headquartered in Calgary, Canada.

Pine Cliff Power produces oil and fuel at a ratio of 21/79, so it needs to be thought of primarily a pure fuel producer. As a fuel producer, Pine Cliff Power is very cyclical because of the dramatic swings within the worth of pure fuel. Notably, the corporate has reported losses in seven of the final ten years and initiated a dividend solely in 2022.

Alternatively, Pine Cliff Power claims to have some benefits over well-known oil and fuel producers.

First, the corporate claims that it has an honest stability sheet (extra on this later), which is paramount within the oil and fuel business, which is characterised by fierce downturns each few years.

Supply: Investor Presentation

As well as, Pine Cliff Power’s administration crew owns 14% of the corporate; therefore, it’s aligned with the shareholders. That is a necessary attribute that buyers mustn’t undermine.

Furthermore, Pine Cliff Power has the bottom pure manufacturing decline fee amongst all Canadian public producers. This reduces the capital bills required to maintain a given degree of manufacturing.

Like nearly all oil and fuel producers, Pine Cliff Power incurred losses in 2020 because of the collapse of oil and fuel costs brought on by the coronavirus disaster.

Nonetheless, because of the large distribution of vaccines worldwide, world demand for oil and fuel recovered in 2021, and thus, the corporate turned worthwhile in that 12 months.

Even higher for Pine Cliff Power, the Ukrainian disaster triggered a rally in oil and fuel costs to 13-year highs in 2022. Consequently, the corporate posted 10-year excessive earnings per share of $0.22 in that 12 months. It additionally initiated a dividend in June 2022, after greater than a decade with out one.

Nonetheless, the worth of pure fuel has slumped since early final 12 months as a consequence of abnormally heat winter climate for 2 consecutive years. This has resulted in exceptionally excessive fuel inventories in North America.

Pine Cliff Power ended 2024 with a stronger This autumn efficiency as a consequence of increased AECO pure fuel costs. Adjusted funds circulation reached $8.6 million for the quarter and $38 million for the 12 months, although each had been down from 2023. Annual manufacturing averaged 23,248 Boe/d, up 13% year-over-year. The corporate spent $8.9 million in capital, earned $10.5 million from asset gross sales, and paid $25.6 million in dividends—all whereas protecting its payout ratio beneath 100%, supported by a profitable hedging program.

Regardless of not drilling in 2024, Pine Cliff grew its reserves. A 2023 acquisition boosted low-decline manufacturing and drilling stock, serving to 2P reserves rise 5.6%. Technical revisions and land swaps added new two-mile drilling places and early potential within the Basal Quartz oil play. Pine Cliff now holds 18.4 internet two-mile places and controls key fuel infrastructure to assist future development.

The corporate plans to renew drilling in late 2025, relying on commodity costs. It introduced a 25-year pure fuel provide deal for a brand new Alberta knowledge heart, diversifying markets with out added transport or hedge prices. Hedging and pipeline methods stay key to defending money circulation and supporting shareholder returns.

Progress Prospects

As talked about above, Pine Cliff Power has the bottom pure manufacturing decline fee amongst all Canadian public producers.

Supply: Investor Presentation

The pure decline of the manufacturing wells is paramount within the oil and fuel business, as excessive decline charges end in extreme capital bills required to maintain a given degree of manufacturing. Thus, Pine Cliff Power has a major aggressive benefit over its friends.

Alternatively, as an oil and fuel producer, Pine Cliff Power is very delicate to the inevitable cycles of oil and fuel costs. Extra exactly, as the corporate produces 79% fuel and 21% oil, it’s particularly delicate to the cycles of pure fuel costs.

Due to the rally in oil and fuel costs to 13-year highs in 2022, Pine Cliff Power posted 10-year excessive earnings per share in 2022. Nonetheless, each costs have plunged from their highs in 2022. Consequently, the corporate is prone to publish a lot decrease earnings per share this 12 months.

Given the extremely cyclical nature of the oil and fuel business and our expectations for barely increased fuel costs within the upcoming years, we count on Pine Cliff Power’s earnings per share to develop by about 5.0% per 12 months on common over the subsequent 5 years, from $0.07 in 2025 to $0.08 in 2026.

Dividend & Valuation Evaluation

Pine Cliff Power is at the moment providing an honest dividend yield of two.5%. It’s thus not a pure play for income-oriented buyers, and people buyers needs to be conscious that the dividend is much from secure because of the dramatic cycles of oil and fuel costs.

Pine Cliff Power’s ahead payout ratio is 30%, which is low, notably for the vitality sector.

General, the stability sheet has weakened in current quarters, and thus, the corporate shall be susceptible each time the subsequent downturn within the vitality sector happens.

Furthermore, it’s important to notice that Pine Cliff Power initiated a dividend solely in 2022, amid multi-year excessive commodity costs. It failed to supply a dividend within the previous years, because it incurred materials losses in most of these years. Subsequently, it’s evident that the corporate’s dividend is much from secure.

About valuation, Pine Cliff Power is at the moment buying and selling for five.8 instances its anticipated earnings per share this 12 months. Given the corporate’s excessive cyclicality, we assume a good price-to-earnings ratio of 10.0 for the inventory.

Subsequently, the present earnings a number of is way decrease than our assumed honest price-to-earnings ratio. If the inventory trades at its honest valuation degree in 5 years, it is going to incur a 7.3% annualized tailwind in its returns.

Making an allowance for the 5.0% annual development of earnings per share, the two.5% present dividend yield, and a 7.3% annualized tailwind of valuation degree, Pine Cliff Power might supply a ~15% common annual whole return over the subsequent 5 years.

This can be a very excessive anticipated return. The inventory is very dangerous proper now, and therefore, buyers ought to watch for the subsequent downturn within the vitality sector earlier than evaluating it once more regardless of sturdy projected returns.

Ultimate Ideas

Pine Cliff Power gives a dividend yield of simply 2.5%, which is simply over the S&P 500’s 1.5% dividend yield. Consequently, the inventory isn’t notably attractive for revenue buyers.

Nonetheless, the corporate has a weakening stability sheet. As well as, it has proved extremely susceptible to the cycles of oil and fuel costs.

As these costs appear to have peaked on this cycle, the inventory is very dangerous proper now. Subsequently, buyers ought to watch for a a lot decrease entry level.

Furthermore, Pine Cliff Power is characterised by extraordinarily low buying and selling quantity. Because of this it’s laborious to ascertain or promote a big place on this inventory.