2 days ago
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A dependable dividend stock yielding over 10 per cent
The often ignored fact about high-dividend stocks, largely among retail investors, is that the underlying companies offering them are usually in some kind of trouble. Perhaps the stock recently tanked because of one too many earnings misses, causing the yield on the dividend to balloon. Perhaps capital allocation isn't management's strongest trait, and they're too scared to cut the dividend, despite profits being on a downward trend. Whatever the case may be, a high dividend is usually a red flag for due diligence to address, not a green flag to load up on shares.
A company that bucks this trend is PetroTal (TSX:TAL), market cap C$586.09 million, Peru's largest crude oil producer, whose consistent dividend of over 10 per cent, distributing over US$130 million to investors since May 2023, rests on a solid balance sheet and income statements with a long-term runway.
Through a financial lens, the company doubled revenue from US$150.23 million in 2021 to US$333.99 million in 2024, while almost doubling net income from US$63.97 million to US$111.45 million, respectively, and is guiding for continued profitability in 2025 (slide 13).
Through a production lens, PetroTal has compounded output by a staggering 56 per cent annually since 2018, while growing reserves at 59 per cent per year, granting it an estimated 10.3 years of proven reserve life. Management is guiding for between 21,000-23,000 barrels of oil per day (bopd) in 2025, up from 17,785 bopd in 2024, with a dividend yield of 13 per cent more than covered by US$60 million in after-tax free funds flow.
The company owns an estimated 114 million barrels in proven and probable reserves still to be extracted, which are valued at US$1.17 billion or US$1.89 per share, highlighting what investors gain exposure to for free at the current share price of only C$0.64.
Guided by a management team well-versed in capital efficiency (slide 15) and the Peruvian oil industry, PetroTal's long-term runway to continue generating profitable growth and reliable income has no business trading at the lower end of its peer group on an enterprise value-to-EBITDA-basis (slide 47).
If oil demand continues to climb through 2030 – as detailed in a recent report by The Oxford Institute for Energy Studies – supporting the consensus forecast of just over US$70 per barrel at decade's end, look for PetroTal stock to undergo a significant re-rating while rewarding investor patience along the way.
Join the discussion: Find out what everybody's saying about this Peruvian oil stock on the PetroTal Corp. Bullboard and check out the rest of Stockhouse's stock forums and message boards.
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