I like to buy value stocks that pay dividends. This includes ConocoPhillips (COP, Financial) which for disclosure purposes I do own in my Roth IRA.
According to its website (www.conocophillips.com) ConocoPhillips has four core activities worldwide:
Petroleum exploration and production.
Petroleum refining, marketing, supply and transportation.
Natural gas gathering, processing and marketing, including a 50 percent interest in Duke Energy Field Services, LLC.
Chemicals and plastics production and distribution through a 50 percent interest in Chevron Phillips Chemical Company LLC.
ConocoPhillips also owns a sizeable stake in Lukoil, a Russian oil company.
The most cited negatives for ConocoPhillips are that the stock price is too tied to the price of oil, its connection with Lukoil, and future competition with ethanol. Although these are factors to consider I believe these are minor factors due to ConocoPhillips’ diversification in other industries and emerging markets. If the stock price were to drop as a result of falling oil prices it gives us an opportunity to buy even more at a cheaper price and a higher yield. Ethanol is currently a non-factor as it is not cost-efficient nor is it produced on a massive scale in comparison to the oil and gas industry. In addition, it will be years, if not decades, before ethanol has any impact, if at all, on the oil and gas business. I believe the only real competition is coal to liquid (CTL) technology, which may take a decade or more to develop, and is an industry I will address in my next article.
ConocoPhillips recently acquired Burlington Resources, a natural gas producer. This is just the beginning of the coming mergers and acquisitions of the natural gas industry in North America. It is only a matter of time when ConocoPhillips acquires or merges with other natural gas producers, perhaps even Duke Energy (DUK), which has a P/E under 13 and is currently trading around its 52 week low. I believe that ConocoPhillips will eventually be the largest producer of natural gas in the United States. In addition, with its share buybacks and uninterrupted dividend payments ConocoPhillips knows how to create shareholder value.
Based upon these facts, I am bullish on ConocoPhillips. And if you don’t believe me, would you believe the two wealthiest investors in the world? Both Warren Buffett and George Soros own large positions in COP. And with a P/E under 7, a dividend yield of 2.5% and a ROE around 23% what’s not to like?
According to its website (www.conocophillips.com) ConocoPhillips has four core activities worldwide:
Petroleum exploration and production.
Petroleum refining, marketing, supply and transportation.
Natural gas gathering, processing and marketing, including a 50 percent interest in Duke Energy Field Services, LLC.
Chemicals and plastics production and distribution through a 50 percent interest in Chevron Phillips Chemical Company LLC.
ConocoPhillips also owns a sizeable stake in Lukoil, a Russian oil company.
The most cited negatives for ConocoPhillips are that the stock price is too tied to the price of oil, its connection with Lukoil, and future competition with ethanol. Although these are factors to consider I believe these are minor factors due to ConocoPhillips’ diversification in other industries and emerging markets. If the stock price were to drop as a result of falling oil prices it gives us an opportunity to buy even more at a cheaper price and a higher yield. Ethanol is currently a non-factor as it is not cost-efficient nor is it produced on a massive scale in comparison to the oil and gas industry. In addition, it will be years, if not decades, before ethanol has any impact, if at all, on the oil and gas business. I believe the only real competition is coal to liquid (CTL) technology, which may take a decade or more to develop, and is an industry I will address in my next article.
ConocoPhillips recently acquired Burlington Resources, a natural gas producer. This is just the beginning of the coming mergers and acquisitions of the natural gas industry in North America. It is only a matter of time when ConocoPhillips acquires or merges with other natural gas producers, perhaps even Duke Energy (DUK), which has a P/E under 13 and is currently trading around its 52 week low. I believe that ConocoPhillips will eventually be the largest producer of natural gas in the United States. In addition, with its share buybacks and uninterrupted dividend payments ConocoPhillips knows how to create shareholder value.
Based upon these facts, I am bullish on ConocoPhillips. And if you don’t believe me, would you believe the two wealthiest investors in the world? Both Warren Buffett and George Soros own large positions in COP. And with a P/E under 7, a dividend yield of 2.5% and a ROE around 23% what’s not to like?
