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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Taikun who wrote (53629)9/24/2004 11:14:03 AM
From: Tommaso   of 74559
 
The currwent payout from COS.UN is more than enough to pay the dividend on the preferred issue; there is even some left over for a modest (2% or less) yield on the capital shares. But any increase in payout goes ENTIRELY to the capital shares. At this time only something like 50% of income is being paid out in distributions; the rest is going to fund expansion of the project. When the expansion is complete, and if oil prices stay high, income could double, maybe triple: much current production is being sold cheap under ill-advised hedge arrangements.

For real pie-in-the-sky, imagine if they raised the payout ratio to 75% and income doubled. That would mean $6.00 a share annual income for each share of the company, COS.UN, but it would mean an additional $4.00 a share for the capital shares of OST. That would mean a 15% yield, which is about what you can now get on some canroys, but this would be good for 50 years and would support a much higher stock price.

The only thing I see to spoil this propsect, aside from extreme political intervention by the Canadian government, that would spoil the outlook is a series of severe and unforeseen technical problems with the extraction and processing of the tar. That is certainly a risk that one needs to consider. That's why I only have maybe 3.5% of my IRA in OIl Sands Split.

Though after talking my way through all the above I may buy more, esepcially if the markets will only tank and give me big gains in my bear funds.
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