Stock Trade Commentary
As my due diligence proceeds, I have decided to add AVF to my portfolio for 2 reasons:
1. If the acquisition fails, AVF’s share price will rise while GPXs share price will sink back below $0.40.
2. AVF’s is paying a $0.06 distribution with September 28 being the ex-dividend date; I might as well take advantage of that.
GPX is the first company ever to be acquired in my portfolio. I should know better for next time when it comes to hedging. I could have bought AVF in the low $5.30s when the news came out. I will be sure not to miss this opportunity in a future acquisition.
I would like to keep AVF in my HELOC portfolio as a dividend payer. They will be converting in January to a corporation paying a monthly distribution of $0.045 with an estimated payout ratio under %60 using current commodity prices. Their production will be almost balanced between oil and gas with numerous opportunities to exploit with their new acquisition.
The monthly distribution comes out to 10% at this price, an excellent yield if you ask me. They currently have no debt but I presume they will be tapping their bank lines to fund the acquisition aside of issuing 10million new shares.
This is also a step towards diversification as AVFâ€˜s cash flow for 2010 comes at 64% from oil and gas, 31% from their Elbow River Marketing division and 5% from their Real Estate holdings which they are looking to sell.
My HELOC portfolio has ballooned and as such I am waiting for the first opportunity to locking profits in order to rebalance or maybe just sell a stock at no loss, remains to be seen. I will never have enough capital to cover all the opportunities out there. One thing is for sure, as the deadline for my low commissions looms in November, I will be preferring dividend payers over regular stocks before I set my account on auto-pilot. As such if AVF dips significantly lower than my purchase price, it will be added ruthlessly.
Would you consider AVF for its distributions? Why not?
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