Vermilion Energy - 14% dividend yield and FY20 growth covered

Vermilion Energy’s geographically diverse portfolio spreads geopolitical and pricing risk across different economies. The company has grown both organically and inorganically through a series of new country entries, with a solid track record of hitting guidance targets. Additionally, management has delivered on environmental, social and corporate governance (ESG) objectives, being highly rated across multiple ESG rating platforms. Notwithstanding this, Vermilion has been affected by the current negative sentiment around Canadian E&P equities, which has dragged down its share price. This decrease results in a highly attractive dividend yield of c 14%, which we believe is sustainable for the coming years under most oil price scenarios. Based on a blended approach of fundamental and market methodologies, our valuation is C$38.3/share, although this remains highly sensitive to commodity price assumptions.