PEYTO EXPLORATION & DEVELOPMENT CORP. $18.17 - Toronto symbol PEY

PEYTO EXPLORATION & DEVELOPMENT CORP. $18.17 (Toronto symbol PEY; Shares outstanding: 138.5 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.0%; www.peyto.com) produces and explores for oil and natural gas in Alberta.

Peyto’s average daily production of 40,903 barrels of oil equivalent is 90% gas and 10% oil.

In the three months ended March 31, 2012, the company’s cash flow was $0.56 a share, unchanged from a year earlier. Lower gas prices offset a 29.7% rise in production.

The shares trade at 8.3 times Peyto’s forecast 2012 cash flow of $2.20 a share. The company’s long-term debt of $470 million is a low 18.8% of its $2.5-billion market cap.

Peyto’s monthly dividend of $0.06 a share yields 4.0% on an annualized basis. The company pays out just 32% of its cash flow as dividends, so it can easily afford to maintain that rate.

Peyto Exploration & Development Corp. is a buy.

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