Pioneer Southwest Looms Large Over Small-Cap Oil Concerns

| About: Pioneer Natural (PXD)

Investors may feel as though they have missed the recent rise in oil-related stocks, but the fact remains that there are still notable opportunities within the sector. Even with the recent meteoric rise in oil and gas stocks, there are still several companies with compelling values and healthy dividends.

As we all know, sometimes fear can lead to some of the most profitable opportunities. Take for instance the recent turn of events in Libya. The bloodshed that has occurred managed to push oil prices to a 29-month high at $105.17 a barrel last Thursday. If indeed oil prices continue to climb to the 2008 high of $145 a barrel, then certainly stocks in the oil industry will continue to rise in price.

Many of the stocks within the oil industry have become expensive following the recent rise in crude prices ... although, there are still a few quality stocks that are still trading on the cheap and -- more importantly -- have plenty of cash to distribute to their shareholders through healthy dividends. This could mean wonderful opportunities for savvy investors.

I ran a screen for small-cap oil and gas stocks with market capitalizations below $2 billion, paying dividends above 4% that are trading at a trailing price-to-earnings multiple of less than 16.

Company Name - Stock Price - Dividend Yield - P/E Ratio

Pioneer Southwest (PSE) $33.39 - 6.0% - 10.5

Whiting Trust (NYSE:WHX) $17.02 - 15.7% - 6.4

Cross Timbers (NYSE:CRT) $46.46 - 6.1% - 16.6

MV Oil Trust (NYSE:MVO) $14.27 - 7.3% - 14.3

EV Energy (NASDAQ:EVEP) $44.41 - 6.8% - 12.7

Hugoton Royalty Trust (NYSE:HGT) $21.62 - 6.8% - 13.9

With a market capitalization of $1.09 billion, Pioneer Southwest is my favorite for a variety of reasons. EPS grew 247.7% to $3.19 (ttm) and yet the current P/E ratio of 10.5 remains significantly lower than the industry average of 20.1. More impressively, the company’s margins are well above the industry average with an operating margin of 58%, gross profit margin of 72.5% and a profit margin of 57%. Pioneer Southwest has shown that it is a more profitable company than its competitors and has a better control over its costs.

For those interested in dividend investing, the stock is considered a high-yield investment with a yield of 6.0%.

Undervalued, cash rich with a high-yield dividend in a current environment of geopolitical unrest are all reasons why Pioneer should be a good buy now and in the future.

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Tagged: , Independent Oil & Gas
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