Tag Archives: NYSE:BP

Oil Majors: The P/E Is Irrelevant In Determining Their Valuations

Summary

  • The oil majors’ P/E are so volatile that it should be used in evaluating the valuation of the oil majors with a grain of salt.
  • On the other hand, their book values per share are much more stable and so the P/B maybe a better metric to use.
  • The yield compared to historical yields may also be an indicator. High yield may imply good value.
  • After determining a dividend is safe, we just need to buy it on price dips.
  • And a price dip is happening right now. So, if the yield is attractive enough for you, consider easing into Exxon Mobil and or Chevron.

P/E is one of the first metrics that investors typically use to determine if a company is overvalued, fairly valued, or undervalued. However, I suspect that the P/E cannot be viewed the same way for oil majors.

Initially, I subconsciously observed that it’s a good time to buy oil majors when their P/Es are high relative to their historical P/Es. But looking at real data, it’s not as simple as that.

I looked at the P/E, P/B, price range, and yields of the past 10 years for Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and BP plc (NYSE:BP). From looking at these data, I strive to derive some conclusion from my observations.

Read More

High Dividend Stocks Priced at a Value: February 2015 Watchlist

When I say “high dividends”, I mean companies which are paying 1.8x (or 80%) more dividends than the index. For example, SPDR S&P 500 ETF Trust (NYSEARCA:SPY)’s Friday closing yield is 1.83%. So, a company paying out a high dividend would be one that pays at least a yield of 3.3%. Likewise, on the Canada side, iShares S&P/TSX 60 Index Fund (TSE:XIU) had a yield of 1.93%. So, a Canadian company paying out a high dividend must pay at least a 3.48% yield.

For February, I identified some high dividend/distribution companies in the US and a Canadian retail REIT that I’ve added to this month. Canadians can consider getting monthly income from this Canadian REIT.

High Dividend US Companies

This list shows the current yields, and I believe are good starting yields (with respective to the company’s historical yields) to start buying into these companies if you believe in the future of these companies.

  • AbbVie (NYSE:ABBV) – yield: 3.38%
  • Philip Morris International (NYSE:PM) – yield: 4.83%
  • Chevron (NYSE:CVX) – yield: 3.79%

Chevron was in the last watchlist: Dividend Stocks at a Value: January 2015 Watchlist. Since that article, Chevron’s yield has drop due to price rising a few dollars. Long-term income investors shouldn’t sweat the small changes in price though, as Chevron is still attractive at a yield of 3.79%.

AbbVie

AbbVie logo

AbbVie is a global biopharmaceutical company hardquartered in Illinois. It was spun off from Abbott in January 2013. It has around 25,000 employees and 7 research & development and manufacturing facilities around the world. AbbVie’s focus is on immunology and virology diseases. Currently, Humira, AbbVie’s top drug, makes more than 50% of the company’s profits. Fundamentally, both Morningstar and F.A.S.T. Graphs show it is priced in the fair value range. Technically, it is bouncing off of a recent bottom. Currently marked as in the fair value range by Morningstar, AbbVie is certainly worth considering on a pullback.

Philip Morris International

Philip Morris logo

Philip Morris is a leading global tobacco company, owning 7 of the world’s top 15 international brands, including Marlboro. Philip Morris holds 28% of the global market, excluding China. Other than to provide products to adult smokers, and to generate superior returns for shareholders, Philip Morris also has the goal of reducing harm caused by smoking by developing products which are close in look, feel, and taste to the conventional cigarettes but seem to be less harmful.
Read More

Dividend Stocks at a Value: January 2015 Watchlist

A good dividend stock pays and even raises its dividend whether the market goes up or down. As long as you don’t sell the shares, you will always get a positive return (the dividends you receive) no matter how the market behaves. Recently, there has been a lot of volatility in the Energy sector due to oil price plummeting so an investor could value dig there to get a high starting yield and potential return once oil price goes up again…that is if one can stand the volatility and the possibility of more downside in the near-term. That’s why I like buying in small chucks at opportune times when a company on my watchlist is priced at a value. Dollar-cost averaging allows the flexibility of buying more shares at a lower price when the market behaves negatively.

For this month, I looked over my current holdings to see which dividend payers are good values to buy. There are also other good Energy companies to look into, including Exxon Mobil Corporation (NYSE:XOM), Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Inter Pipeline Ltd (TSX:IPL), Suncor Energy Inc (TSX:SU)(NYSE:SU), Cenovus Energy Inc (TSX:CVE)(NYSE:CVE), Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ), and Vermilion Energy Inc (TSX:VET)(NYSE:VET).

Classic Dividend Companies

This list shows the current yields, and I believe are good starting yields (with respective to the company’s historical yields) to start buying into these companies if you believe in the future of these companies.

  • Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) – yield: 4.16%
  • Chevron Corporation (NYSE:CVX) – yield: 3.96%
  • International Business Machines Corp. (NYSE: IBM) – yield: 2.82%

Bank of Nova Scotia

Bank of Nova Scotia logo

Bank of Nova Scotia is the third largest bank in Canada. This Canadian leading bank provides financial services in over 55 countries. It’s medium-term objectives were met in 2014. The 2015 medium-term objectives is the same as 2014. For example, earnings per share growth is expected to be between 5 and 10%, while return on equity is expected to be between 15 and 18%.

A table for Scotiabank 2014 Medium-Term Financial Objectives Met
Source: Bank of Nova Scotia Q4 2014 Investor Presentation, Slide 5

Chevron

Chevron logo
Chevron is a large oil company, which pays an attractive dividend of over 3.9%, 20% higher than its 5-year average of 3.3%. It’s paying out 38% of its earnings for its dividends. Historically, this is at the higher end of its yield range, unless one wants to shoot for above 4.25%, which looks possible.
CVX Dividend Yield (TTM) Chart

CVX Dividend Yield (TTM) data by YCharts

If history is telling, then, having raised dividends for 27 years in a row, CVX will be increasing its dividend in Q2 of 2015 even amidst low oil prices. Additionally, Morningstar gives it 4-stars, meaning the shares are currently undervalued.
Read More