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Why I Doubled My Position in Husky Energy

by: The Moneygardener October 10, 2008 | about stocks: HUSKF.PK    

The Moneygardener

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On Thursday I doubled my original position in Canadian oil integrated oil and gas firm Husky Energy (HUSKF.PK). I bought Husky at $33.85 where it was trading at a P/E ratio of 7.0 and a dividend yield of 5.9%. This purchase likely brought Husky up to about a 6-7% weighting in my non-registered portfolio.

Buying oil when the U.S., and possibly the world is going into a recession has its risks, but I believe most of those risks are already priced into this stock. At a 5.9% yield, I am not concerned about Husky's one to two year forward earnings outlook. With its low pay out ratio the company should be able to maintain the dividend if oil stays at reasonable levels.

If the worst case occurs and oil tanks down to sub $60 levels for a sustained period then all bets are off, but I see the odds of the 'sustained period' being measured in years very unlikely. The world is still running out of oil, OPEC is still in the business of making money, and emerging markets continue to strive for the Western life. The race to find alternatives will only be hampered by lower relative oil prices.

Disclosure: The author owns HUSKF.PK.

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This article has 4 comments:

  •  
    Oct 11 12:30 PM
    I sold my Suncor, Nexen, Encana & PetroCanada stock and bought into Canadian Oil Sands yesterday because of the +20% annual yield paid monthly. Also, the 52 week High/current price ratio is similar and potential for M & A. George
    Reply
  •  
    Oct 11 02:17 PM
    Now that all my Canroys are down about 50% I sure hope they can maintain the yield.
    Reply
  •  
    Oct 11 05:18 PM
    they wont bill.
    Reply
  •  
    Oct 12 01:44 PM
    Sort of hard for them to hold up their dividends considering most of the Canroys are long-term growth plays. With Capital access being tough in a market like these, low-oil prices (considering the project economics for oil sands are north of $80/bbl in most cases), and with the regulation coming up in 2012, seems hard to believe these stocks will hold up such high dividend yields. As attractive as these stocks are, I am curious to see what 3Q'08 earnings look like before I make a move.
    Reply
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