Dividend Cut: Whitecap Resources (WCP)

Whitecap Resources cut their dividend 38%

On April 11th, Whitecap Resources (WCP) cut it’s dividend for the second time since I’ve been holding shares. WCP’s annual dividend was reduced by 37.78%, from $0.45 to $0.28. Since 2016 I haven’t invested in any energy producers and am glad with the decision I’ve made up to this point – even with the current rally we’ve been experiencing. The two monthly dividend paying energy stocks I bought – Pengrowth Energy and Whitecap Resources have both beat their dividend to a pulp.

In January, Whitecap Resources first cut their dividend by 40%. At that time I was down 40% on my WCP investment, and I’m now down 23%, so it’s been going up consistently and I’m willing to ride that out while collecting the monthly dividend.

From their press release

Whitecap Resources Inc. (“Whitecap” or the “Company”) announces an increase to its 2016 capital program by $78 million to $148 million from the previous guidance of $70 million. The increased capital program will be funded by reducing the monthly dividend to $0.0233 per share ($0.28 per share annually) from the current monthly dividend level of $0.0375 per share ($0.45 per share annually) and increased funds flow. This proactive reallocation of funds flow will better position our Company to capture improving economics from recovering commodity prices by increasing capital towards profitable growth.

I understand that the dividend cut is for the good of the company, and as they outlined in their most recent press release, is to fund their capital program due to recovering oil prices. I get it, and I support it, actually. I’m not thrilled that the dividend was reduced but with more control of their cash, the stock price should return to my purchase price – and near that area is when I’ll look further into what I’ll be doing. After selling Goldcorp Inc and Valeant Pharmaceuticals recently, I’m not opposed to getting rid of lagging parts within my portfolio in exchange for stronger names.

Before this dividend cut, my 120 shares of Whitecap Resources were paying $54.00 towards my annual dividend income and accounted for 3% of total dividend income, so the damage is very small. Due to the cut, my $54.00 in WCP income has dropped by $20.40 to $33.60 and now accounts for a measly 2% of my dividend income. My annual dividend income of $1,694.12 ($141.18 monthly) has dropped by $20.40 to $1,673.72 ($139.48 monthly). 

Whitecap Resources

Before Net Increase After
Annual Dividend Income $1,694.12 -$20.40 $1,673.72
Monthly Dividend Income $141.18 -$1.70 $139.48
Percentage Increase -1.2%

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