Oil & gas drilling is one of the most promising industries in the energy sector. As the price of oil has gone berserk, these companies are now more attractive to investors. Therefore, we decided to look for the top six companies paying outstanding dividends and a maximum P/E ratio of 20. All the companies below offered a minimum 5% dividend yield in 2010. Data is derived from finviz. While there are hundreds of oil companies listed on the NYSE, only the following large cap oil companies fit this criteria:
Cross Timbers Royalty Trust (CRT): Operating as an express trust in the U.S., Cross Timbers holds 90% net profits interest in different royalty and overriding royalty interest properties in Oklahoma, New Mexico and Texas. The company has a market capitalization of $283.2 million with a trailing P/E ratio of 16.9. Last year’s dividend yield was 6.20%.
EV Energy Partners, L.P. (EVEP): EVEP, based in Houston, Texas, engages in the acquisition, production and development of oil & gas properties. The market capitalization of EVEP is $1.64 billion, and current P/E ratio is 16. With a dividend yield of 6.30%, EV Energy is a pretty nice stock for dividend lovers.
Hugoton Royalty Trust (HGT): Hugoton is a company engaging in the production and sale of oil and gas: it was founded in 1998 and based in Dallas, Texas. The market cap of HGT is $952 million, and P/E ratio is 15. Its 2010 dividend yield was 6.20%.
MV Oil Trust (MVO): MV Oil Trust is a company owning net profits interest in oil and natural gas properties which are located in Colorado and Kansas. The market cap of MVO is $457.93 million, and current P/E ratio is 14.5. Last year’s dividend was 6.90%.
Pioneer Southwest Energy Partners L.P. (PSE): PSE is a company in the ownership and acquisition business of oil and natural gas properties in the U.S. The market cap of PSE is $1.14 billion, and current P/E ratio is 10.7. Last year’s dividend was 6%.
Whiting USA Trust I. (WHX): Founded in 2008 and based in Austin, Texas, WHX is another high dividend oil trust. The market cap of WHX is $226.9 million, and current P/E ratio is 6.03. With a dividend yield of 16.1%, EV Energy is a superb stock for dividend lovers.
Note that most companies in the top 6 list are oil trust companies. The tax structure of oil trust companies is similar to that of real estate trusts. As long as they pay a high ratio of dividends to shareholders, profits are not subject to corporate taxes. Only dividends might be taxed via income taxes. That tax incentive avoids double taxation of profits and dividends. Therefore, as long as the trust prevails, oil trusts offer safe and high returns, particularly for tax-sheltered retirement accounts.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.