Skip to main content

The Globe and Mail

Hold this dividend stock, but watch for a trend reversal

An oil pumpjack sits unused in a field north of Edmonton, February 8, 2013.

jason franson The Globe and Mail

Hi Lou,

Can you please explain payout ratios? I purchased Arc Resources at $14.02, have always received my dividend but when I look it up I get a payout ratio of 256.75. Does this mean my dividend is not safe?


Story continues below advertisement


Hey Bruce,

Thanks for the assignment.

This will be my first inspection of the situation that exists at Arc Resources Ltd. The dividend payout ratio is a measure of what percentage of earnings is paid out in dividends. Another method of calculating the dividend payout ratio is to use cash flow instead of earnings. The research conducted on your behalf indicates that your calculation of a payout ratio of 256.75 may be on the high side. If you go to the company's website you will find their Investor Presentation dated April 7, 2014. On page four there is a chart that seems to indicate that the payout ratio is closer to 35 per cent. You will have to conduct further due diligence as another resource that I found suggests that it could be using the cash flow method of calculating the ratio.

Here's what you might want to focus on. You are up substantially on your investment since you bought at $14.02 and need to decide if you want to continue holding ARX in your portfolio. A review of the charts will help identify risks and opportunities associated with this investment.

The three-year chart indicates that you have been enjoying a nice ride since February of 2013 when the shares broke above resistance at $23.00 until they ran to resistance at $28.00. ARX then pulled back to test support along the 200-day moving average before starting another advance in September of 2013. The shares are currently approaching their all-time high near $34.00 so the question is if there is more to come.

The six-month chart demonstrates that the shares have been moving higher in a channel and have just popped above the upper line of resistance. What is evident from the charts is that ARX trades in a sawtooth pattern providing trading opportunities. What the examination has also identified is that the uptrend line and the moving averages have been tested but not breached.

Story continues below advertisement

ARX is a hold with a prescription to inspect the chart on a daily basis to ensure that you don't get caught up in a trend reversal.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to

Report an error
About the Author
Lou Schizas

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality - and a true believer in the happiness-inspiring powers of capitalism. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at