Positive Dividend Outlook Amid Rising Oil Prices Enables E&P Giant to Enter Best Dividend Stocks List
Abhishek Gupte May 30, 2018
Dividend.com has added an international energy firm to the Best Dividend Stocks List and removed a packaging & adhesive company from the list.
After reaching decade lows a few years ago and “lower for longer” becoming part of the sector’s collective lexicon, oil prices are back with a vengeance. Thanks to a rising economy, greater demand and a dash of geopolitical tension, crude oil prices have surged to more than $70 per barrel – a price not seen since 2014. For the energy sector, this has been a boon with higher profits, cash flows and a resumption of dividend payments.
And this includes our latest Best Dividend Stocks List pick.
As one of the largest pure Exploration & Production (E&P) players in the nation, our new pick has experienced a huge upswing in profits in recent quarters as crude oil and natural gas have rebounded. At the same time, our pick has uniquely positioned itself to keep the growth going.
During the recent bust, our pick continued to rightsize its asset portfolio and has only focused on the most profitable drilling regions/fields. Likewise, a focus on cost-cutting and reducing CAPEX spending has allowed it to boost overall profit margins. With oil now surging, these moves have enabled our new pick to reduce debt, boost profits and, ultimately, restart/boost its dividend.
For investors, our new pick offers plenty of energy to a portfolio and will make the most out of the rising energy environment.
To summarize, here are five reasons why you should own this stock:
- The world’s largest independent E&P company based on proved reserves.
- Focused on dropping costs/CAPEX spending to improve its overall margins and per barrel break-even costs.
- Direct play on the rising global economy and growing energy demand.
- Increased its dividend 6% last year, followed by an increase in its share buyback program.
- Healthy payout ratio of 31% and increasing yield of 1.75%.
Removal of an Adhesive Firm from the Best Dividend Stocks List
For us to take advantage of the opportunity in energy, we need to say goodbye to a decent performer from our list. Since adding this stock to our list last spring, shares have managed to produce a total return of over 35% for shareholders. But, as the stock market has become a bit more volatile, investors have been abandoning more growth-oriented names – and that includes our pick in high-tech adhesives. As a result, our pick has fallen hard and has convincingly crossed our DARS threshold for relative strength. With momentum no longer on its side, the stock’s overall DARS score has suffered, and we have been forced to remove it from our coveted list. However, the firm’s ability to generate cash flows, rising revenues and other dividend metrics remains up to snuff. Therefore, we remain bullish on its shares from an income-generating point of view.
Find out here which global processing giant has made it to our list last week.
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