Considering its large exposure to heavy oil, Baytex Energy (BTE) is likely to post blowout results when it reports in a couple days. Heavy oil prices were generally elevated throughout Q3 as shown by the Western Canadian Select, or WCS, index. The spread between WCS and West Texas Intermediate, or WTI, contracted significantly last quarter. As a result, prices for WCS were at levels not seen since early 2012.
However, Baytex’ stock price has had a muted quarter, with shares essentially flat over the past three months. This is frankly unjustified and may be a case of the market mispricing the earnings potential of Baytex. Another reason to be bullish Baytex is due to its large dividend yield, currently at 6.20%, paid monthly at $0.21 per share.