Eric NuttallCardinal Energy LtdCJ.TODON'T BUYSep 13, 2024

Energy, including the oil juniors, have been doing very well. Support has moved to $10. As long as oil attracts interest, CJ will do well. Watch the oil price.

Great job on bleeding edge of small-scale SAGD, which is becoming more and more common. Trades at a bit of a premium. Not using debt to pay dividend for last year. As Reford ramps up, dividend becomes more sustainable.

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.

Are leaning on their balance sheet to pay their dividend, which they can do. Their Canadian oil sand project should give them more free cash flow and they will fill in that dividend. Good if you buy dividend stocks, but he wants share price appreciation too.

Pays a fat dividend, doesn't chase exploration and is rewarding shareholders. Trades to $8 when oil prices rise. They produce light, sweet crude, so it won't benefit as much as the heavier oil that's exported to Asian markets. He's bullish Canadian oil. CJ is well-managed, though.

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.

Many energy stocks are going sideways. This is in a trading range, which is not bad and you can hold onto it. Maybe you can be this for a trade or wait for a breakout for the long term.

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%.