- Last week’s sell-off was a one time event: Stability in the oil market should return.
- Selling overleveraged and low netbacks oil producers.
- Adding to my favorite Canadian E&Ps.
- Buying two companies in the energy and gold sectors.
- Holding on disappointments such as MEG Energy and Pine Cliff.
- Selling and giving up on bad energy bets.
- Current debt level is manageable.
- In a worst-case scenario, potash break even price is estimated at $260 per ton.
- The company has great stewardship and will be able to withstand the potash market’s downturn.
The recently published short positions on Potash Corporation of Saskatchewan tells a strong story: the shares sold short doubled, yes, that is doubled, from 15 million shares to over 30 million shares from October 15 to October 30.
Albeit a really modest decrease in the last two weeks of less than 2 million shares, the market still thinks that Potash Corp. might lose value in the short to medium-term. The market is protecting itself from that fall.
The market thinks the dividend of Potash Corporation of Saskatchewan isn’t sustainable. The company had one slide in the Q3 earnings release showing its dividend versus cash flow from operations.
Source: Corporate Presentation
As of today, the yield is of almost 7.5%, which is really high. It would not be surprising to see this dividend cut in the medium-term.
Maybe the company wanted to offer a strong dividend to compensate for the lack of growth in the coming years, or could it be to lure dividend investors to buy the stock and keep its price high?
However, no matter how high the dividend is, the focus will always come back to the fundamentals, as the recent movement in share price shows.