Zargon Energy Trust (ZAR.un) produces oil and gas in Alberta, Manitoba, Saskatchewan and North Dakota. Zargon’s output is weighted 50/50 between oil and natural gas. This diversification gives Zargon a lower risk profile. Zargon is a small-cap energy trust (Market Cap ~ $450 million) and doesn’t get much attention from mainstream media and large institutional investors. Zargon has very little debt and continues to use its strong balance sheet to make acquisitions. It recently bought Masters Energy in April for $40 million.
Zargon plans to convert into a dividend-paying corporation with a policy to payout approximately 35% of its cash flow as dividends. Zargon is not expected to cut its dividend upon conversion due to its low current payout ratio.
Zargon currently yields 11% and is still a Buy.
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