It's no secret that it has been a week to forget for many stocks. For Exxon, Walgreens, and Intel the misery streak has lasted a bit longer. Let's dive into what's going on with each of these stocks and see if there is an opportunity for a low-risk investment.
The fully integrated energy behemoth which is ExxonMobil is certainly having a year it would like to forget. While it has been a tough year on the energy industry in general, it has been particularly tough for ExxonMobil. Volatility in oil prices, crises in the Middle East, and problems with some of its refineries, most recently a fire at its massive Baytown refinery near Houston, Texas has caused many investors to sour on the long-term prospects of this premium company. While times have not exactly been fantastic for the company itself, the circumstances have provided intelligent investors the opportunity to secure a healthy 4.95% yield with a relatively low risk of being cut and an almost assumed guarantee of being increased as the dividend has increased roughly 29% over the last five years and 36 consecutive years of dividend raises. Exxon has continued to increase its free cash flow by increasing operating cash flow and simultaneously decreasing operating expenditures. This coupled with a healthy debt-to-equity ratio of 0.74 (calculated as total debt/total shareholder equity).
Exxon operates as a major player in a world that is increasingly dependent on energy. Exxon's fully integrated system provides a safe hedge against volatile upstream and downstream costs. Now is an opportune time to snatch up a high-quality dividend stock at a deeply discounted price.
One of America's two major corner stores, Walgreens is a dividend stock worth taking a looking at. With mounting pressures from e-commerce competition, concern about the company's future outlook, and rising product cost due to the ongoing trade war with China. These factors have ignited panic in many an investor's mind. Upon deeper analysis, it seems that Mr. Market may have overreacted to these factors, but that doesn't guarantee WBA as a company you should want to invest in. Walgreens has a debt-to-equity ratio of about 1.55, this is a little high given the thin margins under which the company operates, but it should be noted that it is quite lower than that of CVS. Walgreens is currently yielding about 3.5% and has grown its dividend for 43 years.
Walgreens' dividend is likely safe, but its limited growth potential (most recent increase just under 4%) coupled with aggressive competition from e-commerce, makes this stock unfavorable to all but those seeking a fully-diversified portfolio.
The semiconductor industry took a big blow as China retaliated on America by devaluing its currency and Intel was no exception to that trend. Here is the bottom line though. Intel is one of the few quality dividend-paying chip stocks. Its market share is massive and chip stocks are here to stay. The advent of automation technology has brought an increased need for quality semiconductors. With a healthy 2.68% yield and a relatively low payout ratio, Intel should be a quality part of any diversified dividend portfolio.
It is this author's opinion that ExxonMobil and Intel offer investors the opportunity to secure quality companies at deep discounts at this time. Additionally, while Walgreens and its dividend are likely safe, it is this author's opinion that it is unlikely to outperform the market even at deeply discounted valuations.
Disclosure: I am/we are long INTC.