Any investor in one of Canada’s oil sands firms will have certainly felt the pain in recent years of low commodity prices and an increasing gap between the price Canadian producers receive for their heavy crude and the price for global lighter crude which has been on the rise of late.
The fact that Canadian oil & gas companies have largely sat on the sidelines watching the valuation of global producers rise of late while seeing valuations of domestic firms languish has been difficult to watch, however I believe this current environment is one which may be profitable for long-term investors willing to take near-term risk in buying into specific companies with very nice dividends currently.
As the share prices of producers such as Altagas Ltd. (TSX:ALA) have languished of late, the corresponding dividend yield increase has made such firms interesting value investments for serious long-term investors willing to wait out near-term volatility.
With an increasing percentage of Altagas’ revenues and earnings expected to come from utilities, rising interest rates have also hit the company’s share price hard. That being said, the company is approaching a valuation which is near book value, an indication Altagas may be undervalued, given its strong balance sheet and the ability to generate increasing earnings and continue to grow its dividend over time.
Altagas has committed to not only maintaining its dividend but increase its current payout in the 8%-10% range until 2021. For investors looking for a steady source of income, this is a company which could be a very profitable long-term play.
Invest wisely, my friends.