Canadian Finance, Economics and Fiscal Analysis
Much earlier I alluded to Petrobakken being a value trap primarily due to the intensive amount of capital expenditures required to keep sustainable production levels.
An article on the financial times does some cursory analysis on production curves in the North Dakota / Montana areas, which are most notably just south of where a lot of the Bakken fields are in Canada.
Cenovus Energy (TSX: CVE) raised $1.25 billion in debt financing today. Here were the relevant terms:
TRANCHE 1
AMT $500 MLN COUPON 3 PCT MATURITY 8/15/2022
TYPE NTS ISS PRICE 99.129 FIRST PAY 2/15/2013
MOODY'S Baa2 YIELD 3.102 PCT SETTLEMENT 8/17/2012
S&P BBB-PLUS SPREAD 137.5 BPS PAY FREQ SEMI-ANNUAL
FITCH N/A MORE THAN TREAS MAKE-WHOLE CALL 20 BPS
TRANCHE 2
AMT $750 MLN COUPON 4.45 PCT MATURITY 9/15/2042
TYPE NTS ISS PRICE 99.782 FIRST PAY 3/15/2013
MOODY'S Baa2 YIELD 4.463 PCT SETTLEMENT 8/17/2012
S&P BBB-PLUS SPREAD 165 BPS PAY FREQ SEMI-ANNUAL
FITCH N/A MORE THAN TREAS MAKE-WHOLE CALL 25 BPS
So they can raise 10-year money at 3.1% and 30-year money at 4.46%. After taxes (assume 26%) this is about 2.3% and 3.3%, respectively. At these rates, I’d be raising as much 30-year capital as I can and figure out what to do with it later – there has to be a way to deploy it at a better pre-tax return rate of 4.46%.
The following is a chart of the US Government 10-year and 30-year bond yield to maturity:
Up about 0.3% from their yield lows, which is fairly significant. Now the $64,000 question is: Is this just a short squeeze, or do yields shoot higher from present?
When stocks open trading ex-dividend, all things being equal, they should trade at the previous closing price minus the dividend. This can vary slightly depending on what happens in the market overnight, but without any relevant news the price should follow that formula.
Genworth MI Canada went ex-dividend today, which was a 29 cent dividend, but their opening price did not even make a blip to reflect this dividend.
Yahoo sometimes adjusts the charts to reflect dividends (especially large special dividends), and sometimes it does not. It always pays to find out whether huge price drops are caused by special dividends or distributions, or whether it was purely market action. For instance, EnCana’s chart at the end of 2009 is still unadjusted by the Cenovus distribution. In MIC’s instance they did not update the chart so what you are seeing is the unadjusted trading action.
I wonder if there are any studies done on future performance of equities compared to how they trade after they go ex-div. Intuitively I would guess there is no correlation whatsoever, but you always hear of amateurish websites that talk about “dividend capture” strategies where you’d buy stocks the day before they go ex-dividend and sell it the day after to “capture the dividend”. What they frequently forget is that the market marks down the stock appropriately (not to mention liquidity), but at least at this one time, the market seemed to forget about the dividend.
The site was down for quite a few hours apparently because of some database corruption. Using some wizardry that I haven’t had to use in quite some time (e.g. command prompt restoration of the database backup file) I restored the database and lost the two weekend posts which I recovered out of Google Reader.
Hopefully this wasn’t a result of a directed hack attack or anything.