By Blane Swenson
During the recent market decline a stock was generally considered to be holding up well if its price stayed above the 50 day moving average. Some stocks not only have held up well, but still carry with them a nice dividend yield. All the stocks listed below have yields of 2% or more, and have recently traded above their 50 day moving averages. Let’s see what they might have to offer now that the market has rebounded a bit.
Spectra Energy Corp. (NYSE:SE) – SE stock is currently trading around $29.05, which is just off its 52-week high of $29.75 and all time high of $30.00. Its 52 week low is $22.80. The current share price gives SE a market capitalization of around $18.9 billion. The forward price earnings ratio is currently 15.79, and the company currently pays an annual dividend of $1.12. This results in a dividend yield of 3.85%.
The company has recently rebounded more so than the overall market. Investors have recently taken a greater interest in owners of pipelines and pipeline companies. Most notable was the agreement by Kinder Morgan, Inc. (NYSE:KMI) to purchase of El Paso Corp. (EP) for $38 billion. Given that EP and SE are similar companies in terms of market capitalization, it is conceivable that a buyer would be willing to step up to purchase SE as well. However, there doesn’t seem to be any evidence that SE management would be interested in a sale at this time. Also, a Seeking Alpha article here explains why SE’s market value cannot be calculated in the exact same manner as EP.
In addition, the Seeking Alpha article also mentions SE could also be a buyer of other companies. Some value metrics do favor SE versus EP in terms of being a potential acquisition target. Trailing price to earnings ratio for SE of 15.66 compares favorably to that of 35.60 for EP. Operating margin of 37.92% for EP slightly exceeds the 34.31% margin for SE; however, SE’s profit margin of 22.26% greatly exceeds the 12.14% margin for EP. Return on assets and equity for SE of 4.29% and 14.16% also compare favorably to EP’s 4.17% and 11.83%. SE currently has a dividend yield of 3.85%. The stock is a buy for dividend investors as well as those looking for natural gas exposure or a potential buyout target, especially on any price pullback.
Transocean Ltd. (NYSE:RIG) – Shares are trading around $48.00, not far from the 52 week low of $43.15. The 52 week high is $85.96. This price gives RIG a current market capitalization around $15.5 billion. As a result of a declining share price since March 2011 RIG currently carries a forward price earnings ratio of just 8.72. The company currently pays an annual dividend of 3.16 resulting in a yield of 6.50%.
The past 18 months or so haven’t been very kind to RIG and this week seems no different. According to Bloomberg, third quarter earnings came in well under expectations and was the biggest third quarter loss in a decade. RIG reported a loss of 22 cents per share as opposed to a consensus estimate of earnings of 76 cents, resulting in its share price dropping over 10% Thursday.
This headline risk and expenses related to repair and cleanup are already somewhat reflected in its fundamentals, especially compared to a competitor like Noble Corp. (NYSE:NE). Although RIG’s operating margin of 19.86% and return on assets of 3.00% compares favorably with that of 16.38% and 2.21% for NE, other measures such as profit margin, price to sales, price to book and quarterly revenue growth do not. With a beta of 1.0, RIG would generally rise and fall in line with the overall market. In a normal operating environment, this, along with the dividend yield, would be very attractive. However, its ongoing legal entanglements will likely make for a much more volatile trading environment for at least the next few quarters. Even with the stock trading near 52 week lows, avoid RIG for at least the next quarter or two while it works through any determination of financial liability related to the Gulf oil spill.
Penn West Petroleum Ltd. (NYSE:PWE) – Shares have a 52 week trading range of $12.45 to $28.98 and currently trade around $18.33 as of this writing. The current price gives PWE a market capitalization of around $8.6 billion and forward looking price to earnings ratio of 20.60. It currently pays an annual dividend of $1.06 resulting in a yield of 5.70%.
The company just reported earnings for the third quarter of .29 versus .66 the year before. However, earnings per share the prior year were the result of a gain related to a joint venture in British Columbia. Revenues were higher compared to last year even as total daily production declined, a result of higher oil prices. As noted in a MarketWatch article recently it has lowered projections of future production due to natural disasters in some areas of operation. A Forbes article also mentions PWE has had other cost and production issues. This may explain why PWE does not currently compare favorably to a competitor like Encana Corp. (NYSE:ECA) in terms of profitability. Its operating margin of 1.06% is nowhere near that of ECA’s 9.48%, and PWE’s return on assets of basically zero pales in comparison to ECA’s 1.29%. Despite some lackluster numbers shares have jumped 47% from the 52 week low just in. Because its price continues to be in a downtrend, only buy if you are looking for dividend yield.
Statoil ASA (NYSE:STO) – STO American Depository Receipts currently trade around $25.50 and has a 52 week trading range between $19.85 and $29.67. This gives STO a current market capitalization around $81 billion and a forward price to earnings ratio of 8.43. It currently pays an annual dividend of $1.15 which results in a yield of 4.50%.
STO’s headquarters is in Norway and has operations around the world. According to Wikipedia the company is 67% owned by the Norwegian government. This alone will limit liquidity in the ADR’s compared to other companies. The company recently reported earnings per ADR of $0.65 which, though less than the consensus estimate of $0.75 per ADR, was much higher than the $0.43 per ADR reported in the prior year. Its return on assets of 16.40% and return on equity of 26.60% compares very favorably with it’s major competitor BP plc (NYSE:BP). Operating margin of 28.47% and profit margin of 10.23% are also much better than the current 7.80% and 6.41% for BP. This may be due in part to the impact on operations of BP resulting from the oil spill in the Gulf of Mexico and it’s ongoing impact. Even though STO does not have the same headline risk BP does, avoid it due to the overwhelming government ownership in favor of similar, more liquid stocks with equal or better yield.
Total SA (NYSE:TOT) – TOT ADR’s currently trade around $52.20 and have a 52 week range between $40.00 and $64.00. Market capitalization at this current price is around $117.9 billion, with a forward price to earnings ratio of 7.08. It currently pays a dividend of $0.57 Euros ($0.81 in US dollars at this date) for a yield at this writing of 6.31%.
TOT is headquartered in France and called by Wikipedia one of the 5 or 6 “Supermajor” oil companies in the world. It has just announced that its facilities in Libya and offshore are gradually returning to full capacity. TOT compares favorably with BP in some financial aspects, but not in others. Operating and profit margins of 15.04% and 7.54% outdo BP’s 7.80% and 6.41%, and return on assets of 9.93% outdoes BP’s return on assets of 6.45%. However, BP’s return on equity of 23.54% currently outdoes TOT’s rate of 19.62%. Because TOT is a foreign based company and priced in Euros, at any given time there is currency risk involved which could affect the dividend yield regardless of company operations. Thus, despite the current decent yield avoid this stock in favor of those with similar yield without the currency risk.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.