# NAL Energy (NAE) anyone own?



## Midas (Jan 11, 2012)

What do you think of this stock? If I bought, would I have to figure out the ACB every month? And if I dumped the stock into a TFSA with a drip, would I still have to worry about the ACB?


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## Spidey (May 11, 2009)

You only have to worry about ACB if you sell. Transferring a stock "in kind" to a registered account is considered a sale by Revenue Canada. Once it is in the TFSA, or any registered account, you don't have to worry about ACB. Some people claim that the investment brokers book value is often inaccurate, but when I've worked it out, for common stock, it always comes out to the correct adjusted cost base. (The time this may not work would be with a more complicated structure such as a REIT.)

As for the stock, I bought a little of it after the dividend cut. It has both oil and gas, so I thought that the oil exposure gave a bit of a cushion. It also seems to be one of the few energy stocks that has had net insider buying over the past year.


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## Eclectic12 (Oct 20, 2010)

Spidey said:


> You only have to worry about ACB if you sell.
> 
> Transferring a stock "in kind" to a registered account is considered a sale by Revenue Canada. Once it is in the TFSA, or any registered account, you don't have to worry about ACB. Some people claim that the investment brokers book value is often inaccurate, but when I've worked it out, for common stock, it always comes out to the correct adjusted cost base. (The time this may not work would be with a more complicated structure such as a REIT.)
> 
> [ ... ]


A sale is not always the only time to worry about the ACB.

In a taxable account, where the investment is paying Return of Capital (Roc), when the ACB falls to zero or less - the RoC portion of the future distributions are reported as a capital gain. This only changes when the ACB becomes positive again.

Some links:
http://howtoinvestonline.blogspot.com/2010/07/return-of-capital-separating-good-from.html
http://www.theglobeandmail.com/glob...pital-means-to-fund-investors/article2248185/

NAE lists RoC as part of their distributions so I'd want to stay reasonably current on the ACB. IMO, the higher the percentage RoC, the more often I'd want to re-calculate the ACB to keep track of how close zero is. Or, if one signs up for a DRiP, the new purchases will automatically add to the ACB. 

This sounds like a potential purchase so a key question is based on when the purchase is made and what the recent RoC distributions have been, how likely is a zero or negative ACB? 


I'm wording it "where the investment" as I've noticed that Mutual Funds, ETFs and lots of other investments pay RoC and have the potential of a zero/negative RoC.


+1 on the transfer to a TFSA. The bookkeeping for one of my trusts is why I did the "in-kind" transfer. Once last set of ACB calculations, with no future calculations to do. It also didn't hurt that I was able to transfer during a dip in the unit price so my CG was about $200!


As for the brokers book value being wrong, the stock ones I've found were received as part of a merger or buyout. My position in NAE was one of these. 


Cheers


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## al42 (Mar 5, 2011)

Hmmm, I've held NAE for a bit now and never seen any part of the Dividend reported as ROC. And according to my T5 all dividends are reported as eligible Dividends.





Eclectic12 said:


> A sale is not always the only time to worry about the ACB.
> 
> In a taxable account, where the investment is paying Return of Capital (Roc), when the ACB falls to zero or less - the RoC portion of the future distributions are reported as a capital gain. This only changes when the ACB becomes positive again.
> 
> ...


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## Eclectic12 (Oct 20, 2010)

al42 said:


> Hmmm, I've held NAE for a bit now and never seen any part of the Dividend reported as ROC. And according to my T5 all dividends are reported as eligible Dividends.


Based on the investor section of the NAL web site, the last time they paid RoC was 2004, at a rate of 37% of the distribution. Interestingly, 1996 through 1999 for RoC were respectively 100%, 93%, 100% and 83% - which is among the highest percentages I've seen.

http://www.nalenergy.com/investors/dividends/default.aspx


So it looks like going forward, RoC is likely not an issue (or for purchases today). They may have decided to convert to strictly eligible dividends instead of a distribution payment. However, being aware of the possibility and staying informed is a good idea.


I know that I've had several investments that didn't pay RoC when I bought them, start to do so when I wasn't keeping tabs on RoC. It make the bookkeeping a mess to try to sort out after the fact. 

What's the French proverb?



> Forewarned, Forearmed



BTW - it makes the reply easier to read/follow if you trim the quoted section down to the relevant parts instead of quoting the entire post.


Cheers


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## Spidey (May 11, 2009)

I also didn't think ROC applied to NAE. However, I did print out those links for future reference. Thanks for that Eclectic12.


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## Eclectic12 (Oct 20, 2010)

Spidey said:


> I also didn't think ROC applied to NAE. However, I did print out those links for future reference. Thanks for that Eclectic12.


I've had it a long time so I became painfully aware of the RoC bit. If I'd known then what I know now, setting up the bookkeeping and staying on top of it wouldn't have been so painful.


I'm glad if nothing else - it's a reminder to keep one's eyes open.


Anyone familiar with their balance sheet and prospects? I've had so little I haven't bothered but I'm thinking I should either sell or maybe buy more.


Cheers


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## CashMoney101 (Mar 6, 2012)

The ROC was back during their income trust days. They just converted to a corporation at the start of 2011 and the distributions are now eligible dividends. I just got into NAE about 6 months ago before their dividend cut. I figured the dividend cut was already priced in and expected at that point and since I think it's a great company that had a really bad accident with bad timing along with tax changes and the price of natural gas at insane lows... Well, even after the dividend cut it's still yielding almost 8% which is the best of any of my dividend holdings.. so I plan to hold on at least until it gets back up over $10. Actually I wrote a blog post about why I invested in NAL energy which goes into more detail.


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## al42 (Mar 5, 2011)

PGF take over of NAE.

http://www.theglobeandmail.com/glob...20120323&archive=ccnm&slug=201203230776657001


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## Eclectic12 (Oct 20, 2010)

al42 said:


> PGF take over of NAE.
> 
> http://www.theglobeandmail.com/glob...20120323&archive=ccnm&slug=201203230776657001


Thanks for the article.

Now it's all going to be rolled into the same investment I already own. 


Cheers


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## al42 (Mar 5, 2011)

Yep, and get a 20% increase to your former NAL dividend.


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## Midas (Jan 11, 2012)

DAMN!! I didn't buy yet!!!


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## Spidey (May 11, 2009)

I sold my holdings for a fairly nice little couple of month profit. (Wish I had previously bought more.) I already own enough PGF.


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## Patience (Mar 8, 2012)

I have a large position in NAL. Will need to think through what I want to do about it with this whole Pengrowth thing.

Does a share transfer trigger a capital gains cost? Is there anything else I should know about these company "mergers".


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## Eclectic12 (Oct 20, 2010)

Patience said:


> I have a large position in NAL. Will need to think through what I want to do about it with this whole Pengrowth thing.
> 
> Does a share transfer trigger a capital gains cost? Is there anything else I should know about these company "mergers".


Usually the purchasing company makes arrangements to rollover the shares without it being treated as a sale (i.e. deemed disposition). However, it does vary.


Then too, even if there is a choice - sometimes the default action by the broker if no instructions are received by a certain date is a sale.

I know I was burned when companies were rushing to convert to the trust structure. I was away on vacation and read the letter from the broker indicating I had to call to request the rollover without a CG, _the day after_ the default of a sale had been applied. 

So stay on top it!!


Then too, don't forget to update your Adjusted Cost Base (ACB) for the new shares, using your original purchase costs.



Cheers


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