Occidental Is Dead, Long Live Occidental

Summary

• Occidental Petroleum has been one of the worst S&P 500 performers in 2019 ending the year down more than 30%.
• The stock run into trouble as falling oil prices were further fueled by leverage issues resulting from the Anadarko acquisition.
• Nonetheless, signs of distress remain low, dividends are still a priority and sales should continue to rise in 2020.
• I always considered the stock to be somewhat 'boring', but I like the chance to buy this company at a great risk/reward.

The Houston TX based independent oil and gas giant Occidental Petroleum (NYSE:OXY) has had a very tough year. The stock is down roughly 35% since the start of the year while I am writing this. Meanwhile, energy stocks (XLE) are up 8% while the S&P 500 is up 30%. The company suffered from a weak oil price and rather high leverage as a result of the acquisition of Anadarko Petroleum. Nonetheless, as oil is recovering and signs of distress continue to be weak, I believe the company will be able to recover as well in 2020. I think the current decline is a great opportunity to buy a great dividend stock. 2020 should be good and a discount like the current one does not occur that often.

Source: Occidental Petroleum

What's Occidental Petroleum?

I like to start these longer dividend-focused articles by giving you a brief overview of the company. In this case we are dealing with an independent oil and gas giant worth more than $35 billion. Occidental produces, exploration and development of oil and gas properties in the United States and internationally. Occidental operates in three segments: oil and gas, chemicals, and midstream and marketing. In August of this year, Occidental completed the acquisition of Anadarko worth $55 billion to cut costs and create synergies. Besides that, the stock is paying a 7.9% dividend yield and is currently trading at multi-year lows.

Where It Went Wrong & Why Timing Matters

The long-term chart of Occidental Petroleum reveals that pretty much all major capital gains were achieved in the period between 2000 until 2011. The stock went pretty much sideways between the IPO in 1969 and 2000 and between 2011 until the 2018 crash. This is one of the reasons I like this stock. Large energy stocks that do not have the

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in OXY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article serves the sole purpose of adding value to the research process. Always take care of your own risk management and asset allocation.