“The Money Machine:” Keith Schaefer’s “Premiere Growth+Dividend Investment”

What's Schaefer's teased dividend growth stock that offers a nanotechnology solution to oil drillers?

By Travis Johnson, Stock Gumshoe, October 30, 2014

I haven’t written about Keith Schaefer in a while, so with oil prices dropping and scaring all the oil investors I thought we’d take a gander at the stock he’s teasing as “one of the safest, long-term growth investments I have ever come across in my investing career.”

The pitch is that this company is bringing nanotechnology to the oil patch, and that they also pay a large and growing dividend (and a monthly dividend, which many people prefer) — and he says he’s owned it for years and calls it his “Money Machine.”

So… what’s he teasing to entice us to subscribe to his Oil & Gas Investments Bulletin? Let’s check out his clues:

“I think nanotechnology will be the next Big Thing in the North American Shale Revolution. And it’s no surprise to me that the company delivering it is my all-time favourite stock.

“This company has a track record of innovation and growth that is un-matched in North America. In fact, I’m stunned it hasn’t been bought yet by one of the Big Boys.

“Even before its new nanotechnology product, revenue, cash flow and DIVIDENDS have been on a steep curve. Nanotechnology is just the icing on the cake—but this product works so well, I expect it to be very thick icing.

“I expect this one product to result in a dividend increase for this company—that would be its TWELFTH dividend increase in the last four years. It’s a Money Machine like no other….

“I think it will produce monthly cash flow for me and my subscribers for at least 30 years.”

That rings several bells — new technology, dividend increases, growth far into the future… I admit, now I want to know what this “Money Machine” is. Some more clues:

“My Money Machine Makes a Fortune off Every Bit of North America’s Massive Production Growth

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“That’s because tens of thousands of wells have to be drilled to bring all that oil to surface.

“This one company helps make that happen better than anybody else.

“They’re so good at what they do, they have doubled their US market share in the last two years.

“Even more compelling is the fact that they’ve done it almost all organically.

“And they’re quickly capturing even more U.S. business… while the size of the industry has been growing!”

And apparently this company is making money from ongoing well production, not just from drilling new wells:

“the drilling part doesn’t take very long… often between 8 days and 30 days.

“It’s what happens after the drilling that makes my Money Machine so much more profitable.

“You see, oil and gas wells produce for the next 30, 40… even 50 years.

“The entire time they’re producing, the wells require constant servicing to maximize production.

“That’s where my # 1 company positioned itself so smartly…

“They went out and bought a company that ‘manages’ these wells for their lifetimes, and the revenue potential is monstrous.”

“Monstrous.” I like that. Not getting real specific here yet, though, so let’s dig for some more tidbits in the ad pitch:

“The company is proposing a stock split. Stock splits are generally very good for stocks.

“But what a split means for this stock is…management sees their high margin cash flow increasing for years to come. They own almost 20% of the stock.”

And… well, that’s about it.

So… the clues are not that specific, but I fed ’em into the Thinkolator anyway — it chugs away for a bit, cogitating on the clues like “stock split” and “growth from acquisitions” and well management and supplies for the oil and gas drilling and fracking businesses, and growing US market share, and that dividend growth history and monthly dividend… and there’s but one answer that comes out the other end: This must be Canadian Energy Services & Technology Corp. (CEU in Toronto, CESDF on the pink sheets).

With one caveat… this is a match for all of the clues, including the specific number of dividend increases, but it’s not contemplating a stock split — it already had a stock split. So I suspect that this original ad is a few months old, though he has also been touting the stock and linking to that same ad in free articles as of yesterday.

It looks like Canadian Energy Services was one of the “busted” Trusts in Canada — essentially, it had been set up as a cash pass-through company that paid out all its earnings as dividends and was tax-exempt, like a REIT or a MLP. That structure was torpedoed in Canada back in 2010, so they converted to a corporation and started paying taxes, but they continue to have a dividend focus and to pay out most of their cash flow (and more than their profits) to shareholders in the form of rising dividends.

And yes, they do pay out monthly, and they have raised the dividend 11 times in four years — so the next time, which could very well be imminent, would be the twelfth. This is really a dividend growth story, the current yield of 3% or so is not high enough to get you excited about a company with such a dramatically high payout ratio (the dividend is much higher than earnings — that has been sustainable in recent years because of non-cash depreciation and share-based compensation and working capital adjustments, but it gives little “wiggle room” if cash flow deteriorates for a few quarters.)

They are really an oilfield services chemical supply company — the develop and sell drilling fluids, muds, anti-corrosion coatings, and that kind of stuff to drillers and producers. And I guess the “transformational acquisition” was probably JACAM, which they acquired last year and which apparently has more of the production/stimulation/maintenance chemicals to supplement what had been a stronger mud/drilling chemicals business from CES. It was a pretty big acquisition for them, $240 million for a company that now has just a market cap of $1.6 billion or so. They’ve acquired lots of other chemical and supply businesses over the years, but most of them have been substantially smaller. I did not locate specific data about the test they say they did with a U.S. company on six wells to prove the improved flow using their nanotechnology, but their nanotech product for fracking is called Revive, you can check it out here.

And… I have to run to a meeting, but I wanted to get you this name so you can talk about it amongst yourselves — they pay out a huge proportion of their cash flow so they have to sell stock or borrow if they want to grow (which they’ve done), and the stock is down a bit in recent months probably mostly because falling oil prices are hitting all oil services names… and perhaps in part because the company had a pretty weak quarter on the revenue front when they announced in mid-August. I don’t know how steady or reliable their business is when oil prices are in decline, but I’m pretty sure the Thinkolator is on target in naming Canadian Energy Services as Schafer’s longtime favorite dividend growth stock. Sound appealing to you? See problems with this one? Let us know with a comment below.


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rjcrot84
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rjcrot84

Yes, I agree that companies that have payouts that are close to net cash flows should for the most part be avoided. I think what Kinder-Morgan is doing with the consolidation of their MLPs into an S-Corp makes them more attractive in the pipeline space, since they’ll be able to finance much of their pipeline expansion with internally generated funds, thereby dramatically lower their cost of capital. Why some of their competitors aren’t considering a similar move is beyond me.

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arch1
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Robert I agree and add that some of these shale plays may face headwinds since oil price drop to$80 BBL range.

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stockman1
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stockman1

Finally. I have something to go on. I will check out this company. lately there has been a resurgence of the teases on Graphene by the Oxford club, Angel Publishing, and the Outsider. This tiny company is located in the midWest, has a PE ratio of 8.5, 1.5 billion in shares ?, and has 94% of shares bought out by Apple, Samsung, US dept. of Defence, and other mainstream tech manufacturers. I believe Tesla is looking at this company for batteries. This company has 70 US Patents on this product. Any body know who this company is??? How do apply… Read more »

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koifish46
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koifish46

Jonathan,
It sounds like it may be Panasonic Corp. (PCRFY) They are partnered with Tesla to run the gigafactory battery project to be built in Nevada. Still a few years away.

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Gui_
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Will

I believe Panasonic is correct using their thin graphite – polymer film sheets for
lithium ion batteries.

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Thomas
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Thomas

I think the company is GrafTech (GTI)

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farralonx5
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farralonx5

Wow, thanks for your analysis of Keith’s ” BIG ” play that is supposed to net him and all the investors that get in on this ground floor opportunity, where he’ll give you a 30 day risk free trial, at which time his ” Oil & Gas Trader club ” will hold your hard erned $799.00 in an escrow account earning Keith and his cronies interest for them but not you for the next 30 days while you asertain whether or not his service is all that he says it is. Thanks for helping me and others not make this… Read more »

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quincy adams
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quincy adams

If oil prices go any lower, the folks at CES may need to apply their “Revive” technology to their price per share.

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Bernie
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Bernie

Even with the recent dip I’m up 166%, including dividends, in less than two years. This dividend grower has been good for me.

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David Grumbling
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David Grumbling

Travis: You did it again! I just read the teaser and was gonna’ Google it, but there you were with the solution. Thanks.

Alan Harris
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Alan Harris

I was beginning to wonder if there was ever a good tease. But then Travis waved a finger at LRE.L a few weeks ago. Looking at my portfolio today, Ive made enough to subscribe here for many years to come. Thanks T.

Ron Korody
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Ron Korody

Caution!! Keith writes well, nice guy, but since losing $$$$ on his “safe for retirement” stock, POSEIDON stock (also an oil services stock; water containment for fracking) AND more losses on his New Zealand oil stock (NZ think was) … AND all on my own, another nano- tech stock, ((Raymore)) which died to zero under suspicious ownership / president activity in Canada)). My advice, STAY AWAY from 1) Keith’s stuff 2) any “nano” anything.

Ron

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stash
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stash

I find it hard to believe that oil prices will remain at their current value. It makes perfect sense to me that this would be the time to invest in companies like this, if your seeking long term investments. A wise man once said if want to see your future look at your past. So shouldn’t we be looking at oil companies with a solid history and buy now while their undervalued?

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John Harris
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John Harris

Falling oil stock prices are apparently due to oversupply. The world wide demand is not increasing at the rate we are pumping new oil from shale. What drove up oil prices in our past was growing demand and the old gusher type wells going dry – less production. That past is not what is happening now so the future for oil could be more falling prices at least until third world country growth explodes creating more demand, but China and India are not growing at the old rate they were. Maybe they will again over the next decade, but by… Read more »

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