We have identified five large-cap Oil and Gas Industry stocks that offer high dividend yields, growth and are low risk investments.
Exxon Mobil Corporation (XOM)
XOM is the largest integrated oil and gas company in the U.S., with a market cap of $394.57 billion. The company has three main segments, namely Exploration & Production (E&P) (Upstream), Refining and Marketing (R&M) (Downstream) and Chemicals. The earnings contribution of the business segments is 77% for E&P, 16% for R&M and 7% for Chemicals. The dividend yield of the company is 2.7% and the dividend payout ratio is 23%. The levered free cash flow yield of the company is 5.74%, which shows that the company should be able to continue its dividend payout going forward. The company has a low debt/equity ratio of 9.54%, and a profit margin of 9%, which shows that the company is financially and operationally strong. The 5-year growth estimate for XOM is 9.84%.
To get a detailed analysis, please view our report "Buy Exxon Mobil: High Dividend Yield And Cheap Valuations."
Chevron Corporation (CVX)
CVX is the second-largest integrated oil and gas company in the U.S. with a market cap of $206.89 billion. The earnings contribution for E&P was 95%, for R&M the contribution is 12%, while the midstream and other segments are in losses. The annual earnings of the company witnessed an increase of 4.2%. The dividend yield of the company is the highest for integrated companies offering 3.5%, and the dividend payout ratio is 23%. The levered free cash flow yield of the company is 5.42%, which shows that it should be able to continue its dividend payout going forward. The company has a low debt/equity ratio of 7.34%, and its profit margin is 11.45%, which shows that the company is financially and operationally strong. The 5-year growth estimate for CVX is 9.84%, based on its expansion plans going forward.
To get a detailed analysis please view our report "Hedge Chevron By Selling Oil ETF."
Occidental Petroleum Corporation (OXY)
OXY has become the third-largest integrated oil and gas company in the U.S. [after the spinoff of Phillips66 by ConocoPhillips (COP)] with a market cap of $68.59 billion. The earnings contribution of the business segments is 89% for E&P, 7.5% for Chemicals and 3.5% for Pipeline and Processing. The dividend yield of the company is 2.6%, and the dividend payout ratio is 23%. The levered free cash flow yield of the company is 0.50%, which shows that the company's dividend payout may be hampered due to unwanted events, which is primarily due to the increased CAPEX of the company in 2011. The company has a low debt/equity ratio of 15.16% and a high profit margin of 27.7%, which shows that the company is financially and operationally strong. The 5-year growth estimate for OXY is 11%, which is the highest among its peers. The company is expected to grow due to its interests in unconventional production, and it is primarily a liquids play.
To get a detailed analysis please view our report "Occidental's Strong Fundamentals, Strong Dividend Yield Earn Positive Outlook."
ConocoPhillips
After the spinoff of Phillips66, the company has become the largest independent E&P company in the country, with a market cap of $68.74 billion. The company's earnings from the U.S. were 35%, and from its international ventures, earnings were 65%. The company has announced plans to undertake a CAPEX of $15 billion annually. The company offers the highest dividend yield of 4.9%, and the dividend payout ratio is 29%. The levered free cash flow yield of the company is 4.23%, which shows that the company should be able to continue its dividend payout even though it is pursuing an aggressive annual CAPEX going forward. The company has a high debt/equity ratio of 48.47% compared to its peers and a low profit margin of 5.25%. The 5-year growth estimate for COP is 0.93%, which is the lowest among its peers. The company intends to reinvest 75%-80% of its cash flows, which will be dependent on the commodity prices going forward, as the company does not have the support of its downstream business.
To get a detailed analysis please view our report" Buy ConocoPhillips: A Dividend Gem In The E&P Industry."
Schlumberger Limited (SLB)
SLB is the largest oil and gas services company in the U.S., with a market cap of $87.56 billion. The company's operations include two business segments, namely Oil Field Services and Distribution. The company has witnessed an increase of 42% in its earnings in 1Q2012, as compared to the same period last year. The earnings contribution of the business segments is 94% for Oil Field Services, and 6% for Distribution. The dividend yield of the company is lower than the companies mentioned above at 1.70%, and the dividend payout ratio is 26%. It has a lower free cash flow yield of 1.25% but the 5-year growth estimate for SLB is 23.25%. This is due to the expectation that Global Upstream spending will reach $1.64 trillion in 2016. A positive trigger in the Upstream spending has been the shale gas boom, due to which there has been increased exploration and drilling activity, which increases the profitability of the company.
To get a detailed analysis, please view our report" Buy Schlumberger To Benefit From The Upstream Oil And Gas Spending Cycle."
XOM | CVX | OXY | COP | SLB | ||
P/E | 10.08 | 8.16 | 9.97 | 8.45 | 12.75 | |
P/B | 2.51 | 1.65 | 1.77 | 1.03 | 2.71 | |
Dividend yield | 2.70% | 3.50% | 2.60% | 4.90% | 1.70% | |
Dividend pay out ratio | 23% | 23% | 23% | 29% | 26% | |
Debt/Equity | 9.54% | 7.34% | 15.16% | 48.47% | 31.3% | |
levered Free cash flow yield | 5.74% | 5.42% | 0.50% | 4.23% | 1.24% | |
Profit margin | 9.00% | 11.45% | 27.70% | 5.25% | 12.92% | |
PEG | 1.08 | 1.51 | 1.16 | 9.67 | 0.66 | |
5 Years growth expectations | 9.84% | 5.38% | 11.00% | 0.93% | 23.25% | |
Market cap | $394.57 bn | $ 206.89 bn | $ 68.59 bn | $68.74 bn | $87.56 bn | |
Levered Free Cash Flow | $22.66 bn | $11.21 bn | $344 mn | $2.91 bn | $1.09 bn | |
Note: The profitability and growth of all the stocks mentioned above are primarily affected by oil and gas prices prevailing in the commodity markets.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
