Opinions Swanzy Quarshie
Cardinal Energy LtdCJ.TOPAST TOP PICKDec 02, 2015
Swanzy QuarshieStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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CJ had a good 2025, and is now of course not as cheap as before. Consenus calls for growth only in the 5% range or so this year. Debt at $215M is much higher than last year, but is only 1X cash flow so not really a leverage problem. The payout ratio is high, at 88% for the nine months to Sept. 30. But it is likely sustaintable near that level. We would not expect a dividend increase, however (last increase was Nov. 2022). It did beat most estimates in the Q3, but missed on gas production estimates. We would consider it 'ok'. We would prefer a lower dividend and more growth.
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Yield is ~7.8%; previously relied on balance sheet to pay that, but now capex is over so this is sustainable from low-mid $50s. Screens expensively, partly due to one of the biggest oil tycoons in Calgary being a major shareholder. Significant leverage to rising oil price, and he's bullish on oil.
To hold this one, you'd need to be a strong oil bull to see significant upside in next 2-3 years.
Very high dividend yield, just under 9%. Gamechanger will be the development of the SAGD program, which will add to its existing base and probably more than double FCF. Cash can be used to de-lever and build the next project. SAGD is modular, so they can add more once first one is successful. Highly leveraged to oil prices, a higher-cost producer.
Likes the scalability. Probably late 2026 for all pieces to come together.
Sentiment remains challenged in the space (a common theme today), even though the Energy Index is up about 20% YTD. People are hiding in large caps, with few funds coming to small- or mid-caps. Hard to see it outperforming. Yield is 10.7%, pretty hard to replace. Not a name for new money.
Look at his Top Picks today, and then decide if you want to let this go for tax-loss selling.
Outspending free cashflow, using debt to finance dividend, not his preference. Gets concerning if oil price drops. Not sustainable for the next year and a half. In 2026, the cadence of capex reduces and the dividend becomes sustainable. Yield is 10.1%.
Look elsewhere. You may sacrifice 2% on the dividend, but you're getting one that's much more sustainable.
For the mid-cap Canadian companies in the space with higher yields, be very careful. If you're looking for dividend sustainability, we've gone through a couple of cycles in the last decade -- dividends have been both increased and reduced. Yield is 11%.
In the space, he prefers FRU.
Spending more money on a project, free cashflow won't be for 2 years, and market's attention span is very short. Concern they'll be burning cash to pay the dividend. Balance sheet indicates sustainable dividend, unless oil price really nosedives. Insider buying. Too small for him. Yield is 10.5%.
He never buys a company on the expectation that it will be bought out. Good exposure to medium-heavy oil. Very manageable debt levels. Older, higher-cost assets, so it needs a higher than average oil price. If you don't care about capital appreciation and just want the juicy dividend, it's not the worst name.
He owns it in his RRSP because of the dividend. Company's done a decent job. Need oil prices to go up to bring excitement to the stock price. It was noted that the company has a negative carbon footprint. Yield is around 10%.
Bruce Murray
(A Top Pick June 12/15. Down 29.88%.) In June oil prices were $60 and there was some optimism at the point that the end of the downside was over on the oil side. When oil rolled again, it hurt the smaller producers especially. This is a medium gravity producer, so oil is a little heavier than most. That means they have pretty high operating costs. When oil prices drop a lot, their margins get really squeezed, but they have been able to maintain a very sound balance sheet and have also been able to work on operating costs. Recently acquired some assets from Penn West (PWT-T) which will really help their growth profile. Likes what management is doing and thinks this is an excellent company and a great Buy at this time.