Should I purchase Encana for my TFSA?

Last week, I bought another 20 shares of BMO stock, bringing my total to 60 shares in my TFSA.  I was quite pleased that I was able to snag a handful of shares when the priced took a mini dip to $61.  Everything has seemed so high lately – great for value but not so great if you’re in the market to buy.

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I need another 40 or so shares before I can starting DRIPing it.  I already have SunLife and Rogers Sugar DRIPing happily away, so those are on autopilot until I need to rebalance my account.  So, I’ve started thinking about what stock I would like to add next to my TFSA dividend portfolio.

I am considering Encana Corporation as my next TFSA purchase.  Encana is a North American energy producer with operations in the areas of natural gas, oil and natural gas liquids (NGLs).  They have an abundant inventory of reserves and land resources with huge development potential.  As a BC resident, I was interested to find out that they have recently (2011) acquired a 30% stake in the Kitimat liquefied natural gas (LNG) export terminal in British Columbia.  With the BC Liberals recently elected for another term, will they continue to promote and push the growth of natural gas products in BC, thereby giving a bit of help to companies like Encana?

Finance-wise, the company pays a dividend of 0.21 cents a quarter.  The stock price has been around $20 of late, which is right smack in the middle of their 52 week range ($17.64 – 23.86).  Their stock price was as high as $93 in mid-2008 before tumbling to its current ranges.  So, is there room for growth in price and dividend earnings?

The big concern with Encana is its exposure to natural gas, which experiences frequent price fluctuations.  Other, similar companies tend to have more exposure to oil, possibly making them less risky.

I haven’t made a firm decision whether or not to buy them.  I like the price and the potential upside, but not certain about the risks of natural gas yet.  Thoughts?

Posted in: Money

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