We took a look to find the dividend giants in the energy space. Here’s are the oil and natural stocks we uncovered.
BP p.l.c. (BP): BP p.l.c. is still recovering from the April 2010, oil spill, reporting profit and operating margins in the negatives at -1.25% and -4.58%, respectively. However, the company is set to acquire major interest in Companhia Nacional de Açúcar e Álcool (CNAA), which will be BP’s largest deal in alternative energy. BP has a forward P/E if 6.87 and sports a beta of 1.13. Click here to see the most recent updates on BP’s oil and gas drilling permits, which could significantly affect this stock’s price. The stock yields 3.8%.
ConocoPhillips (COP): In 2010, the company made a GAAP EPS of $7.62, which was an increase of 135.19% from $3.24 in 2009. In 2008, that figure stood at - $11.16. In 2010, revenues grew by 29.98% to $198.65 billion, after dropping by 37.92% in 2009. EBT margins also improved in 2010 to 9.94% from 6.56% in 2009. For 2011, the Street expects proforma EPS to come in between $6.28 and $9.21. Proforma EPS in 2010 was $5.92. The next earnings release is scheduled for April 25, with analysts expecting a range from $1.45 to $2.26. In Q1 2010, proforma EPS came in at $1.47.
COP shares trade with a price to sales multiple of 0.6. This is the company's second highest multiple since 2001. The debt to equity ratio is 0.33. This company also has significant exposure in Saudi Arabia. For more details, click here. The company yields 3.2%.
Energy Transfer Equity (ETE): ETE is our favorite Master Limited Partnetship. Energy Transfer has interests in both Regency Energy Partners G.P. (RGNC) and Energy Transfer Partners (ETP), which operate pipelines throughout the southwest, Louisiana, Arkansas, and Mississippi.
Energy Transfer will get the bulk of its income from Energy Transfer Partners because Regency is still in the process of ramping up distributions due to project capital requirements. We value shares at $55 apiece on a discounted cash flow basis. Distributions should continue to grow in excess of 15% per year, and there is opportunity for an upside surprise in growth as operating leverage increases as natural gas prices firm up.
Chevron (CVX): Recently edging through its 52-week high, Chevron is not just another large, diversified oil and gas company. The company was awarded another gulf drilling permit this past week. With a market cap of $210.48B, the stock pays a $2.88 (2.90%) yearly dividend and is trading at an 11.06 P/E ratio. The company has strong earnings, with a 13.51% operating margin, and also has an impressive 19.29% ROE over the last year. The company currently has more than enough cash to cover its total debt, and has experienced solid growth lately. Like Exxon (XOM), Chevron made a big move into natural gas with its multi-billion dollar acquisition of Atlas Energy. Finally, the company has exposure to many high growth opportunities, both in emerging markets and within alternative energy. The stock yields 2.7%.
Eni SpA (E): Eni is known for its brash opportunism in regions of political instability. This is one of the companies with the most exposure to Libya, and this has been reflected in its stock price in recent days. The fortunes of its stock price are largely tied to its success in accessing oil fields mired in political instability and also floats in relative line with the strength of the European economy. Investors with a risk-reward appetite similar to that of Eni may do well to keep an eye on the stock price to enact their own opportunistic strategies. The stock yields 4.2%.
Enbridge (ENB): The company made 15.1 billion CAD ($15.5 billion) in revenues in 2010, which was an increase of 21.35%, after falling 22.7% in 2009. The EBT margins in 2010 and 2009 were 8.07% and 15.28%, respectively. The respective ROEs were 13.2% and 22.8%. The 30-day put/call ratio is 0.3. Share price is up 8.3% since December 17, 2010. The stock yields 3.3%.
ENSCO (ESV): On February 18, U.S. District Judge Martin Feldman ruled that decisions must be made on five ENSCO permit applications by mid-March. However, the Obama administration is appealing the ruling. The administration has said that it may have to reject the applications if it is not given more time. An Ensco rig is also drilling Noble Energy’s Santiago well that received the first permit. As of now, ENSCO has a market cap of $7.90B, but this number will nearly double upon completion of its announced merger with Pride International. The stock pays a dividend of $1.40 (2.60%).
Royal Dutch Shell (RDS.A): With a production capacity of nearly 3.6 million barrels a day, nearly twice that of all of Libya’s daily output, the real effect of Libyan instability should be mitigated. RDS.A is one of the top 5 largest players, so expect diversification to mean that as oil prices rise, this master of the game could position itself well. The stock yields 4.9%.
Statoil (STO): With a very strong presence on its home turf, the Norwegian state oil company remains relatively isolated from political risk. As costs of extraction increase on the Norwegian Continental Shelf, Statoil has sought to diversify its extraction further afield. Its exposure has brought it increased profitability and while exposure in Libya is a minimal part of its extraction portfolio, it could now suffer from its ventures in politically sensitive areas. The behavior of investors vis-à-vis the Libyan situation will determine how it plays out for Statoil in the short run. With 5-year EPS estimated at 4%, however, it remains a stable competitor. The stock yields 3%.
Total (TOT): As of December 31, 2009, the company’s worldwide refining capacity was 2,594,000 barrels per day. In 2009, its worldwide refined products sales were 3,616,000 barrels per day (including trading operations), compared with 3,658,000 barrels per day in 2008 and 3,774,000 barrels per day in 2007. This stock will also be affected by a crisis in Saudi Arabia. The stock yields 4.5%.
TransCanada (TRP): The company made 8.06 billion CAD in revenues in 2010, which was a decrease of 10.06%, after rising by 4% in 2009. The EBT margins in 2010 and 2009 were 21.9% and 20.78%, respectively. The respective ROEs were 7.99% and 9.77%. TRP is up 5.4% since December 17, 2010.
TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada's network of wholly owned natural gas pipelines extends more than 60,000 kilometres (37,000 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services with approximately 380 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns, or has interests in, over 10,800 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America's largest oil delivery systems. The stock yields 4.4%.
Exxon Mobile (XOM):Exxon is a well-diversified company, with exposure to markets throughout the world. The firm made a big push into natural gas, which many experts claim to be the energy source of the future, with its $31B acquisition of XTO Energy. This natural gas position could be especially beneficial if nuclear power production is reduced after the disasters in Japan, as natural gas is more of a substitute than oil. If the Fed decides to withdraw QE2, we think Exxon will survive, as we wrote here. At a market cap of just over $400B, the energy giant is the largest company in the world. Trading at a P/E of 13, Exxon pays a $1.76 (2.10%) dividend. Exxon is undoubtedly a leader in the energy business, and operates at an above-average 12.01% operating margin. Over the last 12 months, XOM also has an outstanding 23.43% ROE, better than 90% of the companies in the industry. The stock yields 2.1%.
Disclosure: I am long XOM.