Energy
With Oil Down 10% in 2 Weeks, 4 Integrated Dividend Stocks to Buy Now
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After a huge run 50% run that started last summer, oil got taken out with the rest of the market over the past couple of weeks and absolutely hammered. Down over 10% since late January, the black gold is now back just over the $60 level after printing $66.14 two weeks ago.
While many on Wall Street feel that crude could stay in a tight trading range over the next year, some feel that by 2019 there could be a breakout and a run to $70 a barrel.
If one thing’s for sure, it’s that the overall market weakness has put some of the big mega-cap integrated leaders on sale. Combining their strength within the sector and their solid dividend payouts, they are a good place for weary investors looking to move capital to a safer home.
We screened our 24/7 Wall Street energy research universe and found four Buy-rated stocks offering investors outstanding entry points after the recent selling.
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.
The company reported fourth-quarter earnings that missed consensus estimates on downstream and transitory issues. Cash was low but covered capital expenditures and the dividend. The strong Permian production continues to exceed trajectory and looks largely dated. Most analysts expect an update at the March 6 Analyst Day.
Chevron shareholders receive an outstanding 3.95% dividend. The Jefferies price target for the shares is $149, and the Wall Street consensus target is $135.48. Shares closed Friday at $113.50.
This company remains a top Wall Street energy pick and is now down over 12% in 2018. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
For 75 years in a row, Exxon has raised its dividend on a split-adjusted basis. Thanks to the company’s vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.
Shareholders receive a 4.06% dividend. Merrill Lynch has a $102 price objective, while the consensus target price is $88.95. The stock closed Friday at $75.78.
This is one of the highest yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals. The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. The chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With a rock-solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
Shareholders receive a 4.52% dividend. The $99 Goldman Sachs price target compares with a consensus target of $78.23. The stock closed most recently at $68.18.
This company has survived the seesaw in oil pricing 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.
Shell’s fourth consecutive quarter of dividend coverage at lower oil prices helps reaffirm the positive investment case for the company. Earnings have continued to surprise Wall Street to the upside, and analysts are bullish on the company’s cost reduction targets.
Investors receive a 5.07% dividend. The Merrill Lynch price objective is $74. The consensus figure is $77.26, and shares closed Friday at $63.03.
These four mega-cap companies still offer value and potential upside, and their shares have come down dramatically in price over the past month. Add in the longtime consistent dividends payouts, and all four stocks make sense for all accounts looking for energy exposure but with a degree of safety.
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