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Don’t Judge A Stock By Its Dividend History, Today
In the Canadian oil patch, Vermilion Energy (TSX:VET)(NYSE:VET) is one of those producers that has previously put their foot down, drawn a line in the sand, and declared their dividend distribution as sacred, vowing to “never cut” their dividend in a bid to assure investors all is well and confirm that the company’s stock price was undervalued, a few weeks ago.
Well, that was a few weeks ago. Now, Vermilion’s management team has slashed their dividend, its stock price has been completely decimated, and like many of its peers, investors are assessing whether or not the company will be able to survive, and if so, for how long at currently commodity price levels which are now the lowest since 2003.
In my opinion, Vermilion is a great example for investors of why management guidance really carries zero weight right now, and why investors really need to do their own homework and projections with specific stocks, discounting absolutely all information released by management teams.
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We’re in the middle of unprecedented times, and any previous guidance given by companies before a week or two ago should be thrown in the trash, as key fundamental assumptions have shifted so drastically in such a short amount of time.
Don’t be like the government of Alberta, modeling a $58 U.S. WTI price, when it hits $20 U.S. a couple of weeks later. Be more conservative, so you don’t blow up your budget like Premier Jason Kenney and his team.
Invest wisely, my friends.
