Dividend-News

Chesapeake Reinstates Preferred Dividends - Still A Good Buy?

Published Tue, 24 Jan 2017 07:35:18 -0500 on Seeking Alpha

Good news came earlier than expected Friday when Chesapeake Energy (NYSE: CHK) reinstated dividends on its four classes of convertible preferred stock.
The move came days after the oil and gas company reduced its preferred obligation by repurchasing shares in exchange for 18.8 million shares of common in private transactions.
Since the issues are cumulative, preferred investors will receive four quarters' worth of arrears as well as a regular payment in the next two months, as the company detailed in a filing.

Source: Chesapeake press release
At this point, we should expect gains-oriented investors who successfully bet on a resumption of dividends will start taking profits, to be replaced by income investors and preferred stock dividend funds.
The Chesapeake preferreds collapsed in late 2015 and early 2016, and were suspended last January, bottoming at $5.40 when it looked as though the company would go bankrupt.
I first wrote about them in August, when CHK-D was at about $40. The company has managed to return from the brink by a combination of debt reduction moves and improvement of oil and gas prices.
Let's use the $100 par CHK Preferred D (Quantum description) as the example, since it has the most shares outstanding and is the only one traded on the New York Stock Exchange. It is eligible for preferential tax treatment and can be forcibly converted if the price of the common rises above 57, which is highly unlikely.
Before the energy... Read more