StatOil: Attractive Investment with a Big Dividend 16 comments
an article to
-
Font Size:
-
Print
- TweetThis
StatOil’s (STO) annual meeting was held on May 19, 2009 and announced its dividend as NOK7.25 of which NOK2.85 was a special dividend. The dividend applies to shareholders of record on May 19, 2009 and the expected payment date is June 3, 2009. StatOil pays a dividend once per year and its dividend policy is stated as follows:
It is Statoil’s intention to return to its shareholders, through cash dividends and share repurchases, an amount in the range of 45-50 per cent of consolidated net income as determined in accordance with IFRS.
In any one year, however, the aggregate of the cash dividend and share repurchases may be higher or lower than 45-50 per cent of net income, depending on the company’s e... of expected cash flows, capital expenditure plans, financing requirements and appropriate financial flexibility.
This information is all well and good for those holding StatOil shares on the Oslo exchange, but what about those of us who hold the ADRs traded on the NYSE? Every year it’s the same old song and dance for those of us attempting to figure out STO’s ADR dividend payment in US dollars and its subsequent yield. We first go to the StatOil website and about all we find out there is that the NYSE ADR’s trade on a 1:1 ratio with the Oslo security and therefore the dividend ratio is also 1:1 and a straight currency translation is all that is required. Of course the StatOil website doesn’t announce the ADR dividend, which would make way too much sense and be too accommodating to US investors.
Then we try to find the small print dividend announcement in the WSJ, but that’s easy to miss. So, we end up resorting to internet currency conversion websites. End result: NOK7.25 converts to $1.14US. Since the ADR was trading at $21/share when the dividend was announced, this amounts to a dividend yield of 5.4%.
One has to wonder why on earth StatOil’s management of the ADR dividend amount is so amateurish. They could learn something from BP or other foreign oil companies trading ADRs on the NYSE. I sent an email to StatOil’s “shareholder relations” firm (the Bank of NY) inquiring as to the 2009 ADR dividend amount and received a form reply saying for security reasons they do not provide such information via email! For a company that yields almost double most major US oil companies, you would think StatOils management would go out of their way to publicize the amount and yield of their stock's dividend. Perhaps next year…
These dividend communication issues aside, StatOil remains a favorite of mine for a lot of reasons. One, it provides some protection from what I believe will be future US dollar depreciation. Secondly, StatOil remains the best alternative to Russia gas for the European continent. Thirdly, there has been a big shift in NOC’s view of major US oil companies after years of wrongheaded US foreign policy initiatives. Contracts that used to be routinely given to Exxon (XOM) and Chevron (CVX) now appear to be going to firms like StatOil, Eni (E), and Total (TOT). Foreign countries get less backlash from their citizens when doing business with Norwegian, French, and Italian energy firms than they do when dealing with American companies. This is a sad reality, but one which deserves consideration before laying out investment dollars. That said, XOM and CVX are still great ways to invest in oil, although their dividend yields pale in comparison to STO's.
StatOil’s deep sea experience is a strong positive going forward as is its technological prowess working in harsh environments like the Snoehvit field in the Arctic’s Barents Sea. STO is also increasing its US footprint. Recently, STO invested billions of dollars to acquire an interest in Chesapeake Energy’s (CHK) Marcellus Shale holdings. StatOil is also increasing investments in deepwater Gulf of Mexico production. StatOil announced oil and gas output in the US would double this year from 30,000 barrels a day to 60,000 barrels a day as new platforms begin pumping crude in the GOM. Long term the company targets US production of 100,000 barrels a day by 2012. StatOil owns a 25% stake in two large deepwater Gulf projects: Tahiti, which started producing this month (operated by Chevron) and ThunderHawk (operated by Murphy Oil). StatOil is also showing interest in sharing their deepwater technology and capabilities with Mexico, which sorely needs capital and expertise to tap its remaining oil reserves.
STO is increasingly viewed as a stable and secure source of energy in a worldwide oil patch which is becoming increasingly insecure. All things considered, StatOil remains extremely attractive under $28/share (ADR). Its sweet dividend yield pays investors to wait for the oil price recovery we all know is not too far down the road. This stock could easily double and reach again reach its 2008 high of over $40 within the next 2-3 years.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
BR, Early Bird :)
early_bird: you are correct - STO's dividend is more highly leveraged to oil and nat gas production and prices than alot of the others you mentioned - mainly because they lack comparable refining capacity. but this doesn't bother me at all. you are also correct that they are increasing production volumes: record production in the most recent quarter and 7% year over year growth in oil and gas voumes. this is quite impressive considering that many US oil companies are straining to keep production levels from dropping, let along growing volumes at 7%. as far as the dividend goes, i agree it most likely will not be as large in 2010 as it was this year. however, the dividend is only one reason to buy the stock, and long term, i would bank that STO's dividend will outpace some of the others you mentioned. Exxon in particular pays out a pretty weak dividend rate considering their financial strength and best in the industry balance sheet. i surely wish XOM would move some of the money spent on stock buybacks to instead increase their dividend.
As the author alluded to, upthread, there's the change in structure looming for the CanRoys in 2011. Different firms are planning for the event in different ways. A number of CanRoys HAVE cut their distributions fairly recently because of the decline in oil and gas prices. (Btw, I own both PVX and Pwe).
On May 25 10:38 PM whisperonthewind wrote:
> I'm not much impressed with a dividend of 3.5% on an oil/gas company.
> I'm not even willing to pay foreign taxes of 15% on that dividend.
> If I'm going to invest in a dividend stock even remotely interested
> in oil/gas companies, I'll stick with the trusts. Those have been
> pretty faithful in the distributions and much higher than 3.5% per
> share (or more correctly, unit). And if the dividend is going to
> decrease, I definitely am not going to participate.
In 2008, aggregate compensation totaling NOK 828,660 ($118,380 at year end exchange rate) was paid to the 18 members of the corporate assembly, NOK 4,572,000 ($681,715) to members of the board of directors (12), and NOK 43,233,000 ($6,176,140) to company executives (9). The CEO’s total compensation, bonus and pension benefits, all paid in cash, amounted to NOK 10,173,000 ($1,453,000). His basic salary was NOK 6,847,000 ($978,000). Very few, if any, US executives of corporations of the size of STO would settle for a basic salary, not counting bonuses and stock option awards, equal to the compensation paid in the aggregate to all the company’s executives.
The Norwegian government will not invest in companies that issue stock options to employees. The government considers the practice akin to a criminal activity. Exxon’s stock option overhang is 2.0%.
Exxon’s CEO’s total compensation in 2008 was $22.4 million, but did not include a restricted stock award of $17.6 million, which will be recognized in future years over the vesting period. The CEO’s current vested and yet to vest stock options and restricted stock were worth $112 million at year end. His pension benefits are worth $32 million. (Does he really need a pension?) His 2007 compensation was equal to 541 times the average wage paid to US workers. In 1980, CEOs were paid 40 times the average wage. Today the ratio is 344 times, a number Exxon’s CEO handily exceeds. In 2007, Exxon’s share price increased 24% and the CEO’s salary increased 28%. In 2008, the share price declined 20% and CEO’s compensation increased 34%. He will receive a 10% raise in 2009.
Foreign withholding tax becomes a tax deduction for US taxpayers. STO pays a small nominal dividend and a large special dividend each year, combined into an annual dividend. I would assume the distinction between nominal and special is just to emphasize that the dividend is linked to a fixed payout ratio related to profits. In years when profits are lower, the special dividend will be lower and vice versa.
STO is a great company to own for the long-term. It has foreign energy investments in about 33 countries, but it continues to do exploration in the North Sea, Norwegian Sea and Barents Sea.
What is not to like about this one? Currency hedge, strongly correlated to oil prices, great expertise in harsh environments, conservatively managed without greedy American croney executives feeding at the trough, nice dividend and diversified around the world.
TheHammer: thanks, and i agree - STO appears to be an excellent long term hold for all the issus you mention. also, if the iranian issue ever gets resolved, i think you'll see STO awarded huge contracts there. they'd be working on them now if not for pressure from the US not to.