Go Overseas For This 5% Yielder

| About: ENI S.p.A. (E)

Income investors face a challenging environment in the quest for yield. Valuations for traditional domestic dividend paying sectors (Consumer Staples, Pharma, Utilities, Telecom) seem stretched after nice runs over the past 12 to 18 months. I think now is a good time to look overseas for solid dividend payers with reasonable valuations. Europe seems like a good area to look for dividend stocks with solid cash flow and valuations given the negative sentiment currently hovering over the continent. Eni (NYSE:E) is a major integrated oil company that has cheap valuations, some important new energy finds and yields 5% to boot. It is worth consideration at these price levels.

Recent positives for Eni:

  • It is making good progress with its huge field in Zubair, Iraq. It has raised production to 270,000 B/D and is targeting 1.2mm B/D at full production.
  • The company just announced solid results from its well in the North Sea. The company believes the find has 30mm to 40mm barrels of recoverable oil equivalent.
  • It just made its first important oil discovery in its fields off Ghana.
  • It also recently had a significant gas find in Pakistan.
  • Consensus earnings estimates for FY2012 and FY2013 have risen nicely over the last month.

Eni SpA is an integrated energy company with an over $80B market cap. It engages in the exploration, production, transportation, transformation, and marketing of oil and natural gas. Its main operations are primarily in Europe, Africa, and Asia.

4 additional reasons Eni is a buy for value and income investors at under $45 a share:

  1. Eni yields a solid 5% and sells for less than five times operating cash flow.
  2. The stock is selling near the bottom of its five year valuation range based on P/B, P/S and P/CF.
  3. The median analyst price target on E is $52 a share.
  4. The stock has a very reasonable five year projected PEG (1.35) for a 5% yielder. It also sells for just 7% over book value.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in E 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.

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