Oil has been a hot topic in the news ever since prices began to decline, which has lead investors to paying closer attention to energy stocks. As outlined in a previous article on the energy sector, the recent spike in insider buys in this sector did not go unnoticed. Although looking at trends in insider trades is one way to determine which stocks are potentially good buys, another way is by looking at the dividend data, a feature we offer to premium members. The tab can be found on each stock's page.
Here's a look at the top three oil companies in the industry – BP PLC (BP, Financial), Exxon Mobil Corporation (XOM, Financial) and Chevron Corp (CVX, Financial) – and which stock is a safer buy based on dividend data.
BP PLC (BP, Financial) is currently $37.86/share, which is roughly a 21.9% decline from last year's price today.
Over the past 12 months, BP’s dividend per share (DPS) has been $2.31 and earnings per share (EPS) is $2.53. The current payout ratio is 1.40, which means the dividend may not be sustainable.
The company’s payout ratio indicates that overall, it has had comfortable coverage for its dividends in the past.
BP’s dividend yield is ranked higher than 82% of the companies in the oil and gas integrated industry and also higher than the industry’s median of 4.25%. Another good sign is that it is currently close to its three-year high.
According to the chart above, analysts predict EPS will increase, which is good for the stock price and may help dividends, too.
Gurus that hold this stock include; Bruce Berkowitz (Trades, Portfolio), David Einhorn (Trades, Portfolio), Brian Rogers (Trades, Portfolio), Richard Stahl, Bill Frets, Ruane Cunniff (Trades, Portfolio), Francis Chou (Trades, Portfolio), Tom Russo (Trades, Portfolio), Prem Watsa (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Ray Dalio (Trades, Portfolio), T Boone Pickens (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
Chevron Corp (CVX, Financial) is currently trading for $105.12/share, a 12.7% decline from last year’s price as of today.
Over the past 12 months, CVX’s DPS has been $4.14 and EPS has been $10.86. According to analysts, CVX’s earnings are going to decline dramatically later on this year, which will cause risk for dividends.
On a positive note, the company has consistently been able to increase dividends since 1987, so there is a better chance the company will continue to do so. Guru Peter Lynch heavily focuses on a company’s dividend increase to determine whether or not he is going to invest.
“As companies grow larger and more profitable, their stockholders share in the increased profits. The dividends are raised. The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row.”
Gurus that are currently holding this stock include: Ken Fisher (Trades, Portfolio), James Barrow (Trades, Portfolio), Brian Rogers (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Bill Frels (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Dodge & Cox, Tom Russo (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), John Hussman (Trades, Portfolio), Meridian Funds (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Exxon Mobil Corporation (XOM, Financial) is currently trading at $91.12/share, which is a 7.5% decline from last year’s price today.
XOM’s dividend yield of 3.00% is currently close to its 10-year high, indicating the stock is more profitable.
As shown in the chart above, when DPS stays well below EPS, the payout ratio will remain sustainable. Out of the three large oil companies, BP has had the healthiest and most sustainable situation over time.
XOM's payout ratio is well below 1, meaning the comany is comfortably paying dividend.
Analysts predict EPS is going to drop dramatically. Investors should not be too alarmed, however, since dividend has been increasing each year over the past 30 years and chances for this to continue are high.
Gurus that hold this stock include: Brian Rogers (Trades, Portfolio), Yacktman Fund (Trades, Portfolio), Yacktman Focused Fund (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Jim Simons (Trades, Portfolio), Manning & Napier Advisors, Inc., David Dreman (Trades, Portfolio), Tom Russo (Trades, Portfolio), John Rogers (Trades, Portfolio), Richard Pzena (Trades, Portfolio), John Buckingham (Trades, Portfolio), Bill Frets, PRIMECAP Management (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Michael Price (Trades, Portfolio), Bill Gates (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
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