PetroChina Has High Yield, Low McDep Ratio, and Low Debt

Last week PetroChina paid its interim dividend that had been declared at RMB 0.069535 per share by the Board of Directors in a meeting on August 30, 2001.  Considering that each American Depositary Receipt represents 100 ordinary shares, the dividend is equivalent to RMB 6.9535 per ADS.   At the fixed rate of exchange the payment was made at $0.84 per share.  Holding our shares in a retirement account exempt from U.S. taxes, we were pleased to see that the headquarters country withheld no tax, as is the case for some European stocks.

Assuming a final dividend next June equal to what was paid this year, investors would receive another $0.99 per share for a total of $1.83 for the year 2001.  As a result at the current price, the indicated annual dividend yield on the stock is 10.4%.

The dividend yield is so favorable one must question whether it is sound.  We believe it is or we would not be recommending the stock.  Cash flow covers dividends by a wide margin.  Next twelve months Ebitda minus interest and tax is three times the dividend.  A low ratio of debt to present value of 0.14 adds reassurance.

Our capsule justification for owning the stock was that PTR had half the oil and gas production of ExxonMobil while trading at one eighth the market cap and offering four times the dividend yield.  It is now at one ninth the market cap of XOM and four and a half times the dividend yield of XOM.

We are gratified that on his visit to China, President Bush has had an apparently positive meeting with President Jiang Zemin.  We are optimistic that close economic and political relations will be mutually beneficial.  The better the relationship, the more confident we can be about economic progress and the prospects for PetroChina stock.