Chesapeake Energy CHK Message Board

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Gold/Mining/Energy : Chesapeake Energy CHK

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To: Gabor who wrote (443)	12/5/1998 10:57:00 AM
From: Ed Ajootian	Read Replies (1) of 726

All, Has anyone looked at the CHK preferred stock? It is trading at $18 and pays a $3.50 dividend, or 19%. Buy it on margin and you can get a 30% net return. Not too shabby for a relatively low risk investment. IMO CHK is low risk even though they have almost $1 Bill. in debt and last quarter their working capital went negative. This is because they still have plenty of free cash flow from operations. They generate free cash to cover the preferred dividend by about 4:1. Of course, some of that cash is needed to fund their drilling program, but with their Tuscaloosa play coming along so well it looks like they will be in good shape -- maybe even start paying down some debt from the sales of their non-core assets.

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