It is impossible to time the market, but investors can set certain levels of dividend yields to buy Big Oil stocks such as BP PLC (NYSE: BP), Chevron (NYSE: CVX), and ExxonMobil (NYSE: XOM).
Due to slowing growth in China, oil has fallen in price.
As a result, the share prices of BP PLC, Chevron, ExxonMobil, and other oil stocks have dropped, too (chart below). This always happens with oil falls. The price of oil and natural gas stocks are tied to the price of oil.
That creates an opportunity for long term investors to buy at a discount.
The long term outlook for oil is bullish. Demand will rise. The global economy has still not shaken off the effects of The Great Recession. That and disappointing growth in China has Big Oil and other commodity stocks falling.
The appeal here is that Big Oil comes with Big Dividends.
When the price of a Big Oil stock falls, the dividend yield rises. For long investors, there is now the chance to lock in a strong yield. The dividends of BP PLC, Chevron, and ExxonMobil are all well above average. In addition, BIg Oil stocks have a history of increasing the dividend. Many are Dividend Aristocrats. Those are stocks that have increased the dividend annually for at least the last 25 years.
For the long term shareholder that results in a raise every year just for not selling the stock.
Like all commodities, oil prices will fluctuate. As a result, so will the stock prices of ExxonMobil, BP, Chevron, and others in the sector. That results in the dividend yield rising. It also makes the dividend increases even more rewarding. The long term total return for oil and natural gas stocks looks very rewarding even though the share prices are down in recent market action.