With all of the talk about rising commodity prices, I've spent a lot of time looking for value stocks that can benefit from rising prices. With that in mind, I ran a screen looking for Russell 1000 stocks with above a 2% dividend yield in the basic materials or oil and gas sector. Only the thirteen stocks below managed to pass the test:
|Ticker||Company||Price||Div Yld||P/E||EV / EBITDA|
|SCCO ||SOUTHERN COPPER||31.88||7.02||16.64||9.49|
|KMI||KINDER MORGAN IN||29.11||3.99|
|NUE ||NUCOR CORP||40.82||3.55||49.18||12.44|
|IP ||INTL PAPER CO||30.05||3.49||11.04||5.53|
|OGE||OGE ENERGY CORP||51.43||2.92||17.29||8.94|
|WMB||WILLIAMS COS INC||30.19||2.65||47.21||8.36|
|STLD ||STEEL DYNAMICS||16.25||2.46||19.29||8.66|
|XOM ||EXXON MOBIL CORP||81.57||2.31||11.67||6.81|
|CMP ||COMPASS MINERALS||87.45||2.06||20.45||10.31|
Note- Marathon Oil (MRO) recently spun off a division and their P/E and EV / EBITDA ratios are slightly skewed by this.
With an average dividend yield of 3.33% and an average EV / EBITDA of 7.9x, the list certainly looks interesting, especially for income oriented investors.
Exxon Mobil, Chevron and Conoco
Three of the super-majors, all three of these companies operate in everything oil and gas related. They all sport fortress like balance sheets (Chevron (CVX) and Exxon (XOM) have net cash positions, while Conoco (COP) has Net Debt / Ebitda less than 1x), and all have a long history of great returns on capital and returns on equity. They should be huge beneficiaries of continued rise in oil prices, and their current valuations simply don’t reflect that.
Copper prices are soaring to all time highs due to the nearly insatiable demand of emerging economies, Southern Copper (SCCO) is poised to be a major beneficiary. The company sports a dividend yield over 7% and a P/E barely over 16x despite ROE of over 40%. The stock is down over 30% year to date because of fears over political instability in Peru and economic weakness, but investors at today’s prices should do extremely well in anything short of a complete privitization with no reimbursement by the Peru government.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.