Recently, Oil industry has been suffering a major
setback in the stock prices, and the oil prices has dropped from $100 a barrel
to a low of ~$40 a barrel. Analysts have attributed this fall in the oil prices
to a rising supply inventory due to excessive drilling by OPEC countries to
gain a market share. However, being a natural and scarce resource, the demand
will cross the supply and the market will rebound. Moreover, most of the oil
market is captured by 4-5 major corporations, and because of that their
business is pretty stable. Based on my research using the 3 points listed
above, I have come up with the following companies which are trading at a
seasonal low price and yet, their dividend is pretty stable over the last many
years.
Company Name
|
Stock
Ticker
|
Dividend
over last 12 months*
|
Average
annualized dividend over last 5 years*
|
Stock
price range* (last 1 year)
|
Stock
price range* (last 5 years)
|
Current
stock price
|
Expected
Payout ratio
|
Royal
Dutch Shell
|
RDS.A
|
3.76
|
3.50
|
54.31-83.32
|
54.71-83.32
|
56.97
|
6.6%
|
BP
plc
|
BP
|
2.40
|
2.04
|
34.88-52.33
|
34.88-53.15
|
40.00
|
6.0%
|
Chevron
Corporation
|
CVX
|
4.28
|
3.65
|
93.26-135.10
|
72.52-135.10
|
94.24
|
4.54%
|
Exxon
Mobile
|
XOM
|
2.80
|
2.47
|
81.49-104.76
|
57.49-104.76
|
82.76
|
3.38%
|
*All amounts are in USD
While there are other companies, most
notably in the oil exploration and drilling sector, which provide healthy
dividend, their business is most affected due to the oil market downturn and it
will take them some time to come out of their financial difficulties. Hence,
this is a good idea to invest in the oil provider companies at this point of
time.
Disclosure: I am Long BP
Remarkable info !!
ReplyDeleteHopefully, you got some good investing ideas !!!
ReplyDeleteYeah I m learning :)
ReplyDeleteGood stuff macha.. But I was wondering why you think that oil will bounce back given that people expect further flooding of the market by Iran and when people are talking abt peak demand instead of peak supply
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteFlooding is artificial (to control market share)..In short run, at some point of time, the budget deficit of OPEC will increase, that will force them to increase price. Even if they don't budge amid increased deficit, market forces will correct by increased demand (in long run) of the oil as investment in renewable energy wouldn't make much sense if the oil is cheap. In a very long run, we will start running out of supply and then an analyst like you will come with an apocalyptic report that we will run out of oil 5 years earlier than expected, and Oil will rally..Bottom line is that world run on Oil..It has caused numerous wars..There is no reason that it won't bounce back like other commodities.
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