Thursday, February 26, 2015

Ouch!! ESV cuts dividend 80% --- New yield is 2.33%


Surprise, surprise. ESV announced they are reducing their quarterly dividend $.60 from $.75 to $.15 which is an 80% reduction. The new yield will now be 2.33%

Since I own 263.62 shares, my yearly dividends will decrease by $632.69.

Holy shit that is going to leave a mark! I just did a preliminary check on my forward dividends and they will drop from around $15,500 to $14,800 and some change.

Anyway here is a cut and paste statement from the company.

"To improve capital management flexibility in light of the market downturn, Ensco’s Board of Directors declared a $0.15 cash dividend per Class A ordinary share payable on 20 March 2015, a $0.60 reduction from the prior level. The ex-dividend date is expected to be 5 March 2015 with a record date of 9 March 2015."

In other news, WM is increasing its quarterly dividend by $.01 from $.375 to $.385 which is a 2.66% increase and will increase the yield to 2.82%. The record date is March 9th and the pay date is March 20th. I currently own 25.4 shares so my yearly dividend will increase by $1.02.

Obviously I have a lot of work to do in order to get my yearly dividends back on track. I don't plan on selling any ESV right now, as this probably is the bottom. A lot of times these type of events allow companies to regroup, clean up their house and begin marching forward again. We'll see. I don't need any tax losses right now, but if I do in the future I will use the opportunity to sell off part of my position.





24 comments:

  1. Sorry to hear that, MDP. If you are confident in the company, holding onto the shares might not be such a bad idea afterall.

    Best wishes
    R2R

    ReplyDelete
    Replies
    1. R2R,

      Thanks. Today is a new day and I am eager to continue building my dividend income. I will hold shares for a while, but without a rebound in oil, ESV is probably dead money.

      MDP

      Delete
  2. Same boat here, although fortunately I don't have as much exposure as you. Like yourself, I'll probably sit on this for the short term and continue to evaluate as time goes on.

    ReplyDelete
    Replies
    1. W2R,

      I agree. I am bit pissed that the cut was so huge, with little communication ahead of time.

      MDP

      Delete
  3. MDP,
    Ouch, that sucks big time. Seeing that yearly dividend decrease makes me want to mail you a sympathy card or buy you a beer. You'll get it back. Still killing it at nearly $15,000.
    -RBD

    ReplyDelete
    Replies
    1. RBD,

      After a few Crowns last night I felt much better! :-)

      MDP

      Delete
  4. That hurts MDP. I have 400 shares. However no fear my friend. Pick ourselves back up and keep plugging away. That's why we diversify. We're in this together now. I might buy a couple hundred more shares and reduce my cost and hold for the long term. I think the bottom is here for ESV.

    ReplyDelete
    Replies
    1. DH,

      I am not one to trip over yesterday's hurdles. Onward and upward.

      MDP

      Delete
  5. MDP,

    My condolences on your future dividend income loss. The upside is that you still have nearly $15K, which is a great achievement. From the introduction and based on the yield over 11% going into the announcement, the fact that they cut it is not the surprise but rather the depth. I'm sure you will make it up in no time.

    FD

    ReplyDelete
    Replies
    1. FD,

      ESV was not prepared for a major drop in oil prices. Will they make some major adjustments going forward? We'll see.

      MDP

      Delete
  6. That's a heck of a cut and I know it stings a bit. You'll make it up rather quickly though I'm sure. It won't surprise me if we see more dividend cuts in the O&G sector. I definitely wouldn't sell today as most times the stock will decline really deeply and then recover over the next few days. Plus this should allow management to have more of a buffer because if I remember correctly they ran it pretty close to covering the dividend with earnings. Best of luck.

    ReplyDelete
    Replies
    1. PIP,

      Oil and gas is shaky right now and ESV was not a major player that could handle adverse conditions. They will have to make major changes going forward. Can they? Absolutely. Will they? Time will tell.

      MDP

      Delete
  7. Same here, the cut was expected, but the magnitude surprised! I will also keep my shares so far.

    Best wishes,
    DH

    ReplyDelete
    Replies
    1. DH,

      The lack of communication was pathetic. They need to get their act together.

      MDP

      Delete
  8. Sorry to hear that. Although I would sell the shares. If you look at the company's cash flow statement, you can see that the capex is very big for the company which results in a very low free cash flow. This leaves little room for dividend. These type of companies pay their dividends usually with debt which is a clear warning sign for me.

    ReplyDelete
    Replies
    1. MRHM,

      You may be right. Anything other than a major recovery in oil prices is a disaster. I certainly didn't see prices staying this low this long either. Then again my eggs aren't all in one basket like ESVs are. Poor planning and worse communication.

      MDP

      Delete
  9. Replies
    1. Lanny,

      Those were two of many I used yesterday.

      MDP

      Delete
    2. haha, too funny. But honestly - I am sure you have learned a few things but also have a strategy in place, as you've stated above. Though it made you dip below a threshold, you'll kick that back up in no time.

      -Lanny

      Delete
  10. Bang! Sorry to read that... it happens to the best of us. :-/

    ReplyDelete
  11. MDP,

    Man, sorry to hear that. Not trying to drop a "I told you so", but I did mention that I anticipated a dividend cut or outright elimination back in November when you picked up more shares. The FCF here is just scary, in my opinion. Seems to be a low-quality firm in terms of cash flow generation, but if you don't need the capital then it might just make sense to hold and see where things go. I hope they turn it around for you, bud! :)

    Best regards.

    ReplyDelete
    Replies
    1. DM,

      You absolutely should drop an "I told you so" I remember the post and I mentioned this possibility as well and thought it would be a spec play. Oil prices needed to recover or ESV would crater. Prices didn't recover and ESV cratered.

      MDP

      Delete
  12. I hate it when a stock I own cuts dividends. Thankfully, diversification helps protect us in this event. In your case, you have so many companies which are pulling their weight in your portfolio, and will result in income growth even without adding new money. The positive thing is that I learned lessons from each dividend cut, which has made me a slighlty better investor.

    I am curious, at what stage would you consider selling ESV? At what stage would consider adding to ESV?

    Best Regards,

    Dividend Growth Investor

    ReplyDelete