When you’re doing online stock trading, there are some things you just need to keep looking for - cheap stocks of highly regarded companies.
A reputable company’s stock trading at an unbelievably low valuation is just what a value investor looks for. For dividend investors, it is buying shares of a company that keeps increasing its payout at really high yields. Sometimes, these features amazingly combine in a stock and that’s what we’re focusing on here.
Chevron (NYSE: CVX)
With the recent energy crisis and the decline of oil prices, many big oil companies were caught unawares. Chevron was one among them. Chevron had partitioned over 40% of its employed capital on development projects that were not yet ready for oil production back in 2014, when oil was selling for $100 per barrel. In the present situation, with oil selling for $50 per barrel, those development projects are still not production ready. This has caused fear among investors and traders, with some of them thinking Chevron could be bringing in a dividend cut. This fear has brought the shares of the company to a 1.35 price to tangible book value. This is significantly below Chevron’s average valuation for the past 20 years.
In 2016 and 2017 Chevron needs to fund what’s remaining of these development projects. It also has to pay for its dividend and capital spending with cash flow from these operations. But Chevron has maintained a reputation for being generous with the dividends and has been consistently increasing them for over 25 years. If the present rough period is endured, Chevron could end up being a pretty good investment.
Total SA (NYSE: TOT)
Total SA is another oil company hit by the declining prices though it has been faster in wrapping up some of its major development works that are now producing oil. The company could manage to bring about a 9% increase in total production in 2015 alone. That was crucial in ensuring the company did not experience as much a decline in net income as the other oil and gas companies that experienced over 40% decline. Total’s net income decline was only 18%.
However, in spite of proving it’s better than its competitors in terms of financial health, it has been faring poorly in the stock market with shares trading at only 1.3 times tangible book value. They also have a massive dividend yield of 5.75%. These shares are well below what they have traded at historically in the past 20 years. The other encouraging aspect of choosing Total over other oil and gas integrated companies is the significant lowering of its cost structure, but not at the expense of future gains. The company’s management estimates it should be able to increase production at the rate of 4% each year through 2019. Its present cash breakeven oil price stands at $40 per barrel. That makes the company’s stock quite bulletproof for the future.
With online stock trading you need the right partner to help you identify such opportunities and technology to help you trade effectively. Get in touch with TradeZero at +1 954-944-3885 or email firstname.lastname@example.org.
The content provided here is solely for informational and educational purposes and does not constitute an offer to sell or a solicitation to buy any security or instrument which may be referenced upon the site, or an offer to provide advisory or other services by TradeZero in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investors are advised not to rely on the information contained in this writing to make an informed investment or financial decision. TradeZero explicitly disclaims all liability for any action taken based on any information contained in this writing.