The Dow has now lost about 700 points in the current selloff, but certain stocks are faring even harder and appear to be in a freefall. With investors taking a global risk-off attitude, and concerns that the economy is headed for weakness, stocks in the oil sector have been hit hard, but some top investors like Jim Cramer believe things could get even worse for the Dow Index and even more so for some major oil stocks like Chevron (CVX) and Exxon (XOM). Here is a closer look at the two companies and the levels at which the stocks might be worth buying:
Exxon is a top pick for oil exposure and dividends. Investors should be watching this stock for a potential buying opportunity at lower prices. Cramer points out that Exxon shares dropped to about $67 just last year when the market was seeing the type of correction we seem to be having now. He believes that since Exxon shares have not yet seen a significant drop, it might be vulnerable as the market weakness continues. Cramer also seems to be concerned that Exxon's dividend yield is below what many other top oil companies payout.
Another factor for investors to consider is that Exxon actually trades at a price to earnings ratio of about 10 times, but other major oil companies, like BP (BP) are trading for 6 to 8 times earnings. This is another reason why Exxon might have more room to fall. If the shares do get to about $67 again, it is likely to be a great buying opportunity. Exxon has a history of raising dividends. In 2007, Exxon's quarterly dividend was 32 cents per share, but now it is 47 cents per share. That is about 50% growth in the dividend, and Exxon's payout is likely to continue rising.
Here are some key points for XOM:
- Current share price: $81.91
- The 52 week range is $67.03 to $87.94
- Earnings estimates for 2012: $8.28 per share
- Earnings estimates for 2013: $8.83 per share
- Annual dividend: about $2.28 per share which yields about 2.8%
Chevron Corporation shares were hitting new 52-week highs just a few weeks ago, but with the drop in oil and the markets, the stock now hovers barely above $100 per share. Cramer notes that this stock went down to about $90 last year when the markets were in correction mode. Chevron appears to have less downside from current levels and it does offer a dividend that is about 3.6%, which will probably help to keep the stock from falling much further. Another positive is that Chevron trades for about 8 times earnings. This is a very reasonable valuation which could probably help support the stock at the $90 level, if not higher. Chevron has plans for growth and it expects to increase production between now and 2017. With a reasonable valuation, growth potential and the likelihood for additional increases in the dividend, Chevron is worth buying on any major dips to about $90 per share.
Here are some key points for CVX:
- Current share price: $100.14
- The 52 week range is $86.68 to $112.28
- Earnings estimates for 2012: $13.47 per share
- Earnings estimates for 2013: $13.50 per share
- Annual dividend: $3.60 per share which yields 3.6%
BP, PLC looks to be one of the least expensive oil stocks and it has dropped enough to be an interesting buy right now. This stock now trades for around 6 times earnings and it has a compelling dividend that yields about 5%. The company is managing the issues and claims related to the oil spill and it appears to be a turnaround story for the long-term. BP has even started to raise the dividend in recent months and there is plenty of potential for the dividend to be increased in the future.
Here are some key points for BP:
- Current share price: $37.50
- The 52 week range is $33.62 to $48.34
- Earnings estimates for 2012: $6.41 per share
- Earnings estimates for 2013: $6.46 per share
- Annual dividend: $1.92 per share which yields 4.9%
Data is sourced from Yahoo Finance.
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.