Pengrowth and ARC target steady payouts

Article Excerpt

ARC ENERGY TRUST $19.86 (Toronto symbol AET.UN; Units outstanding: 250.9 million; Market cap: $5.0 billion; SI Rating: Speculative; Dividend yield: 6.0%) produces oil and natural gas in western Canada. Its average daily production of 67,207 barrels of oil equivalent (including gas) is weighted 46% to oil and 54% to natural gas. In the three months ended March 31, 2010, ARC’s revenue rose 39.5%, to $314.1 million from $225.2 million a year earlier. Cash flow per unit rose 16.7%, to $0.63 from $0.54. Increased production and higher oil and gas prices pushed up results. ARC currently yields 6.0%. The trust plans to convert to a conventional corporation on January 1, 2011. However, it has over $2.2 billion in tax losses it can use to delay paying corporate taxes. As well, it will probably pay out only 45% of its cash flow as distributions this year. That low payout ratio will help it maintain its current high yield. The trust’s debt remains low, at…

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