There’s no doubt that one of the most stable industries out there is that of the integrated oil and gas firms. These companies are highly profitable and tend to pay some of the highest dividends in the market. The three stocks highlighted in this article are U.S. traded and major players in the oil and gas space.
So, why these three? Well, each one has an annual dividend growth rate that has exceeded 10% over the past five years. That means that while paying pretty good dividends, they are continuing to grow them. These companies also have relatively small payout ratios; we don’t want to be buying into a company that can’t possibly sustain its payouts, so a low ratio is great for us.
The three companies that we’ll take a look at in this article are Exxon Mobil Corporation (NYSE:XOM), Occidental Petroleum Corporation (NYSE:OXY) and Chevron Corporation (NYSE:CVX). These three companies meet the outlined criteria above, and they also happen to be among the best of the integrated oil and gas companies. Let’s take a look at them individually.
Exxon Mobil Corporation (NYSE:XOM) is quite clearly the titan of the field. This company has a long standing record in American history and is currently battling with Apple Inc. (NASDAQ:AAPL) over the top market cap spot. Now, let’s get to the meat of it: Why is Exxon Mobil on this list? Probably because of their 10.2% annual dividend growth rate--that’s a pretty solid number and is something that any dividend investor would love to see.
The current yield on XOM stock is 2.55%, and that’s with a 9.2 P/E ratio. Exxon Mobil Corporation (NYSE:XOM) has a very low payout ratio that sits right around the 22% mark, a number that indicates that Exxon has the capability to increase the dividend more over the coming years. Another number I like at the company? How about price to sales. It’s at 0.84. Sub-one numbers aren’t uncommon in the oil and gas industry, but at least you’re paying less than one year’s sales for the company.
When compared to other companies, Exxon Mobil Corporation (NYSE:XOM) does have a price to book value that is a bit on the high side at 2.45. This obviously comes about because of the name recognition that Exxon brings along with it. If you’re looking for a company that’s right around the 1.00 mark then you should check out BP plc (ADR) (NYSE:BP); they’re sitting at 1.09 at the time of writing.
Another Rockefeller Entry
Whether you like it or not, J.D. Rockefeller has his name everywhere in the oil and gas industry. His standard oil company is the founding basis for many current oil companies, and Chevron Corporation (NYSE:CVX) is no exception. Chevron made it onto this list of top companies by increasing their dividend by an average annual rate of 13.93% over the last five years, beating out Exxon but leaving room for our number three stock!