As you may have noticed, I like annoucing when one of my companies increases its dividend payments. Well, sometimes the reverse occurs, and I decided that I should note as well.
Pengrowth Energy Trust has just annouced that distributions will be reduced by 25% to $0.17 per month, starting in Januray 2009.
The distribution cut is hardly surprising, but I am somewhat surprised that the cut is so mild. After all, the price of a barrel of oil has fallen from over $140 last July to about $40 right now.
Digging a little more explains this fact, though. Pengrowth uses forward price swaps and option contracts on about 50% of their oil production for 2009 (at $86) and 2010 (at $93). The trust also does this for natural gas, although to a lesser extent.
I own a very small position of Pengrowth in my DRiP portfolio (it is one of my newest positions). A nice feature of the reinvestment plan is that both the reinvested dividends and the additional purchases get a 5% discount. So not only do I get to add money without have to pay a commission, I get a discount on purchases. I plan on slowly increasing my position in the company in 2009, a few $100 at a time.