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Occidental Petroleum (NYSE:OXY) produces and markets crude oil and natural gas, manufactures industrial chemicals, plastics and fertilizer and transports natural gas through pipelines. The company has grown profits at a 30% over the last ten years. Dividends grew at a lesser rate (9%) though they are expected to rise to an 11% pace. OXY’s return on equity has been in the 11-20% range. The company should continue to grow dividends and earnings as a result of:

(1) restructuring efforts which have resulted in a focus on low risk, long reserve life properties which should provide the company with a steady production growth profile,

(2) the company’s expertise in enhanced oil recovery techniques,

(3) acquisitions,

(4) improving reserve replacement expected to be 140% over the next five years.

Negatives:

(1) OXY earnings are very levered to the price of crude oil,

(2) political instability remains a major threat to earnings.

OXY is rated A++ by Value Line, has a 7% debt to equity ratio and its stock yields 1.9%.

Statistical Summary

Stock Yield

Dividend Growth Rate

Payout Ratio

# Increases Since 2001

OXY

1.9%

11%

24%

9

IND*

1.7

7

31

NA

Debt/Equity

ROE

EPS Down Since 2001

Net Margin

Value Line Rating

OXY

7%

17%

2

28%

A++

IND*

18

18

NA

7

NA

*IND is the average for the integrated petroleum industry as complied by Value Line

Note: OXY stock made steady progress off its March 2009 low, surpassing the down trend off its May 2008 high (straight red line) and the November 2008 trading high (green line). Long term the stock is in an up trend (blue lines). The wiggly red line is the 30 day moving average. The Dividend Growth Portfolio owns a one half position in OXY. The stock is on our Buy List; the lower boundary of its Sell Half Range is $140.



Disclosure: I am long OXY.

Source: Liking Occidental Petroleum At These Prices