Oil prices have rebounded over the last eight weeks, climbing more than 30% to the $60.00 per barrel level. This is a positive sign for oil and gas stocks and a great opportunity to find undervalued stocks. Each of these undervalued oil stocks has a strong international footprint and provides a high dividend yield. That means they have room to grow; and in the meantime, you can collect quarterly income checks.
High Dividend Oil Stocks on the Move
Oil stocks cratered along with oil prices last June due to an increasing supply of shale oil and mediocre economic data. Between June and November of 2014, oil prices fell around 25% to $80.00 per barrel.
Those were the good old days for the oil industry. In November, the Organization of the Petroleum Exporting Countries (OPEC) said it had no intention of reducing its output. This seems to fly in the face of traditional supply/demand metrics. When demand is down, you reduce supply. Not surprisingly, oil prices tanked further to around $45.00 per barrel at the beginning of the year.
That said, oil prices have since rebounded and are currently trading at the $60.00 per barrel level. In fact, over the last eight weeks, oil prices have climbed 34%. Still, oil prices need to climb an additional 82% to hit levels seen last June.
All that means is that there is room for growth; but not for all oil producers.
Since last summer, the entire oil industry fell in step with oil prices; big and small. Some collapses were justified; other oil stocks fell because nervous investors were running for the exits. That means there are a lot of great investing opportunities out there right now.
While many believe it’s still too early to reconsider the oil industry, it’s important to remember that globally, the oil industry is doing better than it is in the U.S.
Russian oil companies are doing fine; so is Brazil’s state oil firm. Chinese, Vietnamese and Malaysian output is also experiencing healthy growth.
If you’re thinking of getting back into oil and gas stocks, look for large companies that have a huge international footprint. Also, consider those that provide a high dividend yield.
Strong international operations typically mean a large company will be able to weather a storm better than a smaller one with few operations. Not only that, it should be able to rebound better. In addition to long-term capital appreciation, a big oil company that provides a high dividend yield helps generate regular income in the midst of market volatility.
The recent rise in oil prices is a good sign for high dividend-yielding oil stocks. The higher the price of oil, the more money these oil stocks will make.
Top 3 High Dividend Oil Stocks
While going after the oil stock with the highest dividend yield might seem like a great idea, remember there is a risk/reward payoff. The higher the dividend yield, the greater the risk. While there are oil stocks out there with higher dividend yields, these three offer strong yields and great long-term growth potential.
Exxon Mobil Corporation (NYSE/XOM)
Exxon Mobil Corporation is the largest publicly traded oil company in the world, with a market cap of $365 billion. Saudi Aramco is the world’s largest oil corporation, with some valuations going as high as $7.0 trillion.
Currently trading near $87.00 per share, Exxon Mobil’s share price is down roughly 15% since June 2014. That said, the company’s share price is up roughly five percent since the middle of March. To reach its summer 2014 highs, Exxon Mobil’s share price needs to climb an additional 15%.
On top of that, Exxon provides an annual dividend of 3.4% or $2.92 per share. Despite falling oil prices, Exxon continues to raise its annual dividend. Since the markets bottomed, Exxon has raised its dividend yield 62.0% from $1.66 per share in 2009 to $2.70 per share in 2014. (Source: Exxonmobile.com, last accessed May 21, 2015.)
Exxon’s dividend payments to shareholders have grown at an average annual rate of 6.4% over the last 32 years. (Source: Exxonmobile.com, last accessed May 21, 2015.)
Total S.A. (NYSE/TOT)
Based in France, Total S.A. has operations in more than 130 countries. In addition to engaging in all aspects of the oil and gas industry, the company also produces petrochemicals and fertilizers, as well as specialty chemicals for the industrial and consumer markets (rubber processing, adhesives, resins, and electroplating).
The company has a market cap of $121 billion and provides an annual dividend of 5.1% or $2.68 per share. Trading near the $53.00 per share level, Total’s share price is down more than 25.0% since last June. But it is up 14.5% since the middle of March. To reach its summer 2014 highs, Total’s share price needs to climb an additional 35.0%.
BP p.l.c. (NYSE/BP)
BP p.l.c. is the world’s third-largest publicly-traded oil company, behind Exxon Mobil and Royal Dutch Shell. The company has operations in about 80 countries and has reserves of 17.5 billion barrels of oil equivalent. With 14 refineries, BP processes 3.2 million barrels of crude oil per day. (Source: BP.com, last accessed May 21, 2015.)
BP has a market cap of $130 billion, has a forward price to earnings ratio (P/E) of 14.37, and provides an annual dividend of 5.7% or $2.40 per share. The company is currently trading at around $42.75 per share; that’s more than 15% below June 2014 highs of more than $50.00 per share. Since the beginning of January, BP’s share price has climbed 15%.
Since 2011, BP has raised its annual dividend 98% from $1.68 to $2.34 in 2014. (Source: Nasdaq.com, last accessed May 21, 2015.)