The fear over the European debt crisis has pushed stocks and commodities like oil down sharply, in just a matter of days. Over the past couple of years, investors have been well-rewarded when buying dips, especially with oil stocks. Investors have also done well by buying dividend stocks, so it makes sense to consider buying stocks that have been beaten down due to their exposure to oil, that still offer a high dividend yield. This strategy could lead to capital gains if the share prices rebound, plus it gives investors income, which is so important in a low interest rate world. Here are a few oil sector stocks that offer what could be bargain valuations, rebound potential, plus major dividend payouts while investors wait for higher prices:
Chesapeake Midstream Partners L.P. (CHKM) shares were trading around $28 in early May, but it has pulled back. This is probably thanks to some not so positive headlines for Chesapeake Energy (NYSE:CHK). However this company has fundamentals and a dividend that are worth considering. Chesapeake provides pipelines for natural gas, natural gas liquids, and oil with about 3,600 miles in the network. It recently reported strong financial results for the first quarter of 2012, with net income of $52.4 million. This was an increase of $13.6 million, or 35.1%, from the 2011 first quarter. It also declared the quarterly cash distribution at $0.405 per unit for the 2012 first quarter, which was a 15.7% increase over the 2011 first quarter distribution. At just about $25 per share, and with a yield over 6%, this stock looks attractive for income investors.
Here are some key points for CHKM:
- Current share price: $25.51
- The 52 week range is $23.93 to $31.19
- Earnings estimates for 2012: $1.51 per share
- Earnings estimates for 2013: $1.75 per share
- Annual dividend: about $1.62 per share which yields about 6.1%
Total SA (NYSE:TOT) shares were trading around $55 in March, but a spill in the North Sea, and the concerns over Europe have caused this stock to take a beating. It has dropped about 20%, in just weeks. Since Total is based in France and has significant operations in Europe, these shares tend to move with European markets. The spill in the North Sea appears to be manageable and even though oil prices have dropped, it still remains high enough for Total to generate solid profits. Total operates globally, so this offers geographic diversification even if Europe remains weak. This stock now trades for close to 6 times earnings and it offers investors a superb yield. Total shares bottomed out around $40 and it now trades close to that 52-week low. With all the negative headlines, it's possible for Total shares to get even weaker, so it makes sense to buy in stages.
Here are some key points for TOT:
- Current share price: $44.78
- The 52 week range is $40 to $59.56
- Earnings estimates for 2012: $7.28 per share
- Earnings estimates for 2013: $7.73 per share
- Annual dividend: about $2.61 per share which yields about 5.5%
ConocoPhillips (NYSE:COP) recently completed a spin-off of its Phillips 66 (NYSE:PSX) refining division. This could lead to more stable earnings for the company since refining margins can be volatile. Conoco is now focused on exploration, production, and transportation of petroleum products. This stock remains a top choice for income investors as the company has a history of dividend increases. For example, in 2005, the quarterly dividend was 31 cents per share. But after consistent increases, the quarterly dividend is now up to 66 cents per share. That is more than double, in just about 7 years. With a reasonable price to earnings ratio of about 8.5, and a dividend that is more than double the average yield for a S&P 500 Index stock, these shares are worth considering now.
Here are some key points for COP:
- Current share price: $53.73
- The 52 week range is $52.13 to $80.13
- Earnings estimates for 2012: $6.35 per share
- Earnings estimates for 2013: $6.36 per share
- Annual dividend: $2.64 per share which yields 4.9%
Energy Transfer Partners (NYSE:ETP) shares recently traded around $50 per share, but it has seen a sharp pullback in just the last few days of nearly 10%. This company owns and operates natural gas pipelines and provides transportation services. Energy Transfer Partners recently reported disappointing earnings and this has cause some weakness in the stock, but that appears to be a buying opportunity. The company reported profits of 25 cents per share, which is down 64.8% from 71 cents in the prior-year quarter. With a yield of about 7.5%, the recent dip in this stock might not last for long as investors fade the quarterly result in favor of a generous yield.
Here are some key points for ETP:
- Current share price: $46.19
- The 52 week range is $38.08 to $51
- Earnings estimates for 2012: $1.76 per share
- Earnings estimates for 2013: $2.28 per share
- Annual dividend: $3.58 per share which yields 7.5%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.