RBC Very Positive on 3 Top Large Cap Dividend Oil Stocks

By Lee Jackson Updated Jan 13, 5:35AM EST · Published Jul 19, 8:10AM EDT

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RBC Very Positive on 3 Top Large Cap Dividend Oil Stocks — © Thinkstock

[cnxvideo id=”506324″ placement=”ros”]After a huge run from the February lows, the spot price of oil has recently pulled back about 10%, and for investors who have been waiting to add to positions or initiate some energy sector holdings, now may be a very good time to nibble on some of the top companies. For many investors, staying with the large cap integrated companies that are very liquid makes good sense. They also pay outstanding dividends, which should help in the event the sector and oil trade sideways for a while.

A new RBC research report remains positive on the top integrated companies, and while the second-quarter production numbers are usually lower, and costs typically higher, the cost reductions should help to offset some of the weakness. Three stocks are rated Outperform, and all are good for growth and income accounts.

Exxon Mobil

This company remains a top Wall Street energy pick. Exxon Mobil Corp. (NYSE: XOM) is an energy sector play that the Merrill Lynch analysts are very positive on long-term, as the overall corporate strength of the massive integrated giant plays a significant part in the company’s usually solid earnings reporting pattern and in maintaining dividend coverage.

The company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that many on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Some very solid reasons for adding the stock to a long-term growth portfolio are that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation.

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Exxon is also a very strong company from a financial standpoint. It has an AA+ credit rating and an outstanding debt-to-equity ratio of 0.23. Exxon is free cash flow positive, with the company reporting free cash flow of $6.5 billion in 2015 and management cutting the capital expenditures budget for 2016. It is a sound investment to buy and hold forever.

Exxon investors receive a 3.17% dividend. The RBC price target for the stock is $100, and the Wall Street consensus price objective is $94.73. Shares closed on Monday at $94.82.

Royal Dutch Shell

This company has survived the plunge in oil pricing plunge as good as or better than any other major integrated stock. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.

Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.

In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

The company’s $50 billion acquisition of BG Group finally closed in February, and a reported 2,800 jobs will be cut. This continues the reorganization efforts that began last year with 7,500 job cuts.

Investors receive a huge 5.74 % dividend. No consensus price target was listed, but shares closed Monday at $55.71.

Total

This company is another giant European energy giant, this one based in France. Total S.A. (NYSE: TOT) is a global integrated energy producer and provider, a leading international oil and gas company, and the world’s second-ranked solar energy operator with SunPower.

The company operates through three segments. The Upstream segment explores and produces oil and gas; ships, trades and markets natural gas, liquefied natural gas and liquefied petroleum gas (LPG); generates power; and mines and markets coal.

The Refining & Chemicals segment refines and produces petrochemicals and provides sealing, insulation, fluid transfer and transmission and transportation solutions, as well as offers chemical processes and services for electronics, surface finishing and semiconductor manufacturing. It is also involved in trading and shipping crude oil and petroleum products.

The Marketing & Services segment supplies and markets petroleum products, including automotive fuels, biofuels, home heating oil and heavy fuel oil, lubricants, LPG, asphalt, aviation fuel, additives and special fuels and special fluids through service stations for light vehicles and trucks.

The main drivers behind the company’s ability to stay profitable include an increase in oil and gas manufacturing and strong growth in the company’s very profitable refining division.

Total investors receive a 4.77% dividend. The consensus target is $54.12. Shares closed on Monday at $48.32.

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These are the kind of large cap market leaders that make good sense in long-term growth and income portfolios. Investors may want to buy partial positions in front of earnings.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.