Birchcliff Energy’s (TSE:BIR) recent 900% dividend hike speaks volumes about its business ethics. The Canadian intermediate oil and natural gas company’s new growth plans and financial strength have everything to do with this tremendous raise.
The company’s commitment to enhancing shareholder value whenever it can, is commendable. Last week, living up to its prior guidance, the quarterly BIR stock dividend was raised to C$0.20 per share from C$0.02, placing it on track to achieve an annualized dividend of C$0.80.
The news of the hike was accompanied by the announcement of Birchcliff’s five-year plan, which emphasizes increasing returns to shareholders while focusing on profitability and sustainable growth.
Management noted that the new plan will allow the company to focus on expanding cash flows and margins. Birchcliff aims to have “enough cash flow to fund CapEx (capital expenditure) and dividend and not draw down debt” to avoid any balance sheet issues.
Birchcliff CEO Jeffrey Tonken believes that the company’s strong focus on delivering outsized dividends will continue to be sustainable unless any macroeconomic issues like oil price decline hinder the flow.
Keeping current strip prices constant, the company expects to generate C$570 million cash flow this year. “And of that $300 million, we are going to give our shareholders $213 million, 80 cents a share or 20 cents a quarter. So that leaves us with $87 million of excess funds. If oil averages US$70 this year and natural gas averaged $3, that $87 million would disappear,” said Tonken.
Is Birchcliff Energy a Good Investment?
Wall Street is bullish on BIR stock, with a Strong Buy consensus rating based on seven Buys and two Holds. The average price target of C$12.26 indicates an upside of 33% from current levels. Shares of the company have increased 11.6% so far this year.
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