Is this a good time to buy DOM?

DOM is a massive ERI or Excess Royalty Interest located in Alabama. I bet you did not know that Alabama had gas wells. I really did not know this but they do. They are low quality coal seam wells. Dominion Resources sold these wells to Highpoint that runs them. It does not affect DOM or the ERI on who owns the wells. Thier last dividend was .60 or 2.40 a share. It showed both declining price per MCF and declining production. This still pays about 13%. Natural Gas prices have been awful this year but should turn around at some point. This could bring the dividend back up to 3.20 a year. On the declining production, I know you can go in and rework the well and do all kinds of compressors and whatnot to increase production. I have no idea if Highpoint is doing this. At 13% and with Natural Gas prices trending higher over the last month or two, is this a good time to buy or dollar cost average my buys?

One Response to “Is this a good time to buy DOM?”

  1. smartestmanalive Says:

    Why did you buy this stock in the first place? First and foremost you should never purchase a stock because of its dividends you should buy a stock because you expect its dollar value to increase over time.

    As far as DOM i do not know anything about them but i do read charts and they are clearly in a downward trend without any defining reversal. The stock is trading at 5 year lows. Today (12/28/07) It closed on a support level of $18.25 if it goes through this level the next price support is around $17.25 which can be seen on a monthly chart. If that price doesn’t hold up the next price support level is about $14.75 which the stock traded at back in 2000.

    Another question you have to ask is even if the price of Nat gas goes up will DOM see any of that profit? If not why would the price of the stock get any better.

    And another piece of advice, never dollar cost down unless you are absolutely positive of a reversal, but rather average up by adding size to your position as the stock increases in price.