There’s a clear winner for dividend safety, longevity and steady increases in the big oil sector.This company has grown its dividend at an average rate of over 7% every year for the last 20 years and it also has been able to increase that dividend no matter what the price of oil has been.
In this article, I will be searching for the one large oil company that has the safest dividend. With oil prices continuing to fall towards the $30 level, it is important to see how much flexibility companies have when it comes to their ability to continue paying their dividend. I will be using a similar process as I used for an article I wrote last month after Kinder Morgan (NYSE:KMI) cut its dividend to determine which major oil company has the safest dividend.
I used the FinViz stock screener to find my initial list of companies that are profitable and have outperformed the global energy sector ETF (NYSEARCA:IXC).
Industry: Major Integrated Oil & Gas, Independent Oil & Gas
Dividend Yield: Positive
PE: >1 [Profitable]
Market Cap: > $10 billion
Screen Results & Elimination
After running the screen, I found fourteen companies that met these criteria.
Now that I had my initial list of large oil companies, I looked at the dividend history of each company and eliminated those companies that have had a dividend cut after the top in oil in 2008. In addition, I also excluded EPD because it is an MLP and I already covered it in my article on MLPs. Like with my MLP article I eliminated any remaining stocks that have underperformed the global energy market over the last year, as represented by the iShares Global Energy ETF [IXC].
The top dogs in the oil business, Chevron, BP and Exxon have been taking a beating lately with crude oil prices in the $40 per barrel range but no need to feel sorry for them, they haven’t switched to driving Yugo’s. Yeah, they’re still making money but it’s a bit tougher for the average investor to cash in with oil stocks, unless you can think a little differently. Dave Bartosiak has a better idea.
I get the question “What are the best oil stocks to buy?” all the time. Recently I’ve been asked that more and more as oil continues to drop. For some reason Americans love oil. Even more, they love oil stocks. We’ve been pounded over the head so much with “peak oil” theories and talk of oil going up forever that the thought of a new paradigm in oil prices is just beyond us.
Don’t think that the bottom for oil is in. There is new supply coming online daily, a weak Chinese currency isn’t going to help, and neither will changes on the demand side of the equation. If you’re looking to pick that bottom, good luck. The problem with trying to pick bottoms is you can only be right once, but you can be wrong a lot of times.
Oil stock prices continued heading south but one investor is betting big time on gas futures, spending about $1 Billion for just over 19 million shares.
It was a week where oil prices tumbled to their lowest close in more than 4 months but natural gas futures gained for the first time in 3 weeks. On the news front, the top story came from billionaire investor Carl Icahn’s 8.18% stake buy in natural gas exporter Cheniere Energy Inc.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures dived 6.9% to close at $43.87 per barrel, natural gas prices gained 3% to $2.80 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Crude Slump Batters Exxon, Chevron Profits.)
Oil prices extended their losing streak and fell for the sixth straight week, the backdrop being another increase in the number of crude-directed rigs. An upwardly moving rig count has underlined concerns about an expansion in the commodity’s global supply glut. The recent turn of events in Greece, Iran and China also created pressure. Finally, a stronger dollar has made the greenback-priced crude more valuable for investors holding foreign currency.
Meanwhile, natural gas fared much better amid predictions of strong summer cooling demand with majority of the central and southern U.S. reeling under extreme heat. The U.S. Energy Department’s weekly inventory release – showing a smaller-than-expected increase in the commodity’s supplies – also helped to push up prices.
Recap of the Week’s Most Important Stories
1. Shares of Houston-based natural gas company Cheniere Energy Inc. jumped more than 8% following the announcement that Carl Icahn has taken a 8.18% stake in the company. The activist investor spent slightly more than $1 billion to accumulate 19.4 million shares of Cheniere Energy.