Whitecap Resources Dividend Cut

Dividend Cut: Whitecap Resources (TSE: WCP)

Dividend Raises

On January 20th, Whitecap Resources (TSE: WCP) announced a monthly dividend cut by 40% to $0.0375 per share ($0.45 per share annually) from the current dividend level of $0.0625 per share ($0.75 per share annually) commencing with the February dividend payable on March 15, 2016.

My 12-month forward dividend income generated from WCP has been reduced from $90.00 to $54.00, averaged out to a $3 loss in monthly dividend income.

Whitecap Resources Revised Outlook

The drawdown in crude oil prices have weighed on the company’s projections, and they announced a 53% reduction to their 2016 capital program to $70 million from their previous guidance on December 15, 2015 of $150 million. The dividend cut will reduce WCP’s cash requirements by $91 million annually.

With their revised 2016 guidance, WCP’s payout ratio is reduced to 85%.

From their revised outlook:

The past year has been volatile and challenging, however, the financial and operational strength of Whitecap has allowed us to be well positioned going into 2016. In response to the dramatic drop in crude oil prices we are taking concrete steps to protect our balance sheet. This includes reducing our capital program, disposing of certain production facilities while maintaining operational control and reducing our dividend which in aggregate provides us with $233 million of additional financial liquidity in addition to maintaining a total payout ratio below 100%. As a result we anticipate having approximately $455 million of unutilized credit capacity on our current bank line of $1.2 billion

What Should I Do?

While I’m happy that management is working on improving the balance sheet, I am very upset with this dividend cut.

If I had not experienced such large paper losses in only the past two months, I would sell right now. I am currently down a little over 40% on WCP shares, so am hesitant to sell, but it may be better to cut my losses and allocate that capital elsewhere. I really don’t want this to turn into another Pengrowth Energy Corp (TSE: PGF). I’m getting very sick of the oil industry and don’t plan on investing in the industry until things really pick back up.

What do you guys think? Should I cut my losses and sell WCP to better allocate my capital? Or give it some time and see if I can recoup some paper losses before selling?

Dividend Beginner

A 22 year old Canadian dividend growth investor striving for early financial independence; building as many passive income streams as early as possible.
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  • My annual dividend income was cut by about $85 on that, but as a I have had WCP for more than three years, my adjusted cost is now just over $8. While obviously that figure will decrease at a slower pace than it did previously it still yields >6%. I will hang on a little longer, though I fear the $45 a barrel position this dividend assumes for next year might be overly optimistic.

    • Hey MaxPower,

      That’s a pretty significant cut, sorry to hear that. Unfortunately even the stock price has fallen to below $8.00. It’s really been killed when it was holding up relatively well considering the energy sector for quite a while. We’ll see what happens. Nice to meet a fellow shareholder, regardless.

      DB

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