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The high dividends yields are very striking. However, high yields can sometimes be unsustainable, especially if the dividend is not growing, but the price of the shares is falling. So when I saw that there was a Ftse 250 Actions with a performance of 13.66%, definitely justified a closer inspection.
A flyer
The company in question is Ithaca energy (LSE: ITI). The actions of the oil and gas company based in the United Kingdom have fallen 4% during the past year.
As for commercial operations, it focuses on exploration, development and production in the North Sea of the United Kingdom. By extracting crude oil and natural gas from its fields on the high seas, it earns money selling products to refineries and gase distributors.
Unlike some actions in this sector that have not yet produced income, Ithaca has sites that are completely operational. This is a key factor when considering it as a dividend participation. After all, if finance are not strong, dividends are usually one of the first areas that are cut to help relieve cash flow pressure.
The company's latest update detailed a positive perspective in the future. The first oil of the Talbot project is anticipated before the end of the year, with drilling in the exploration well of Jocelyn South “It offers immediate potential production if it succeeds.” If they enter line, it could further increase income and leak to a higher dividend per action.
The risks remain
The dividend policy establishes that the management team aims to provide “Annualized dividends of 15-30% of the net cash after operational activities.” Then, naturally, if operations work well and income increases, the dividend will increase.
However, this can be seen as a risk. Ithaca operates in a volatile sector. Oil and gas prices move up and down. It could fall based on events related to natural climate, geopolitical tensions in the Middle East or even the demand for sectors such as travel and tourism. None of these factors are under the control of Ithaca. So, if prices fall at the end of this year, it could reduce income and, ultimately, it means that the dividend falls.
Another risk is the price of the action. Energy stocks such as Ithaca can jump according to speculation with respect to future projects. This means that if an investor buys now and the feeling around the new agrio projects, the investor could keep a large loss not made of the price of the action, even if he is paid to the dividend.
Risk versus reward
I think ithaca is undoubtedly a high -risk volatile stock. This is the case of an investor is considering it for profits or capital income. However, the risk is balanced by the size of the potential reward. A performance greater than 13% is considerable. When comparing it to the performance of other assets that pay income, it should not be ignored.
Therefore, for an investor who is happy with the level of risk, I think it is worth considering this today.
(Tagstotranslate) category. Dividend-Shares (T) category. Investiging
