Is this a Golden Era for Oil Companie...
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May
17
Jonathan Yates
Is this a Golden Era for Oil Companies?
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Investors looking to hedge against a market drop should consider major oil companies with robust dividends and promising futures such as BP (NYSE: BP), Chevron (NYSE: CVX), Occidental Petroleum (NYSE: OXY) and Eni (NYSE: E).

A previous article on this site focused on the appeal of Total SA (NYSE: SA), the French oil giant.

Oil stocks are now in the proverbial “sweet spot.”  Economic growth is starting to rebound around the world, which will increase the demand for oil.  When that happens, the cost of crude goes up.  That always lead to a rise in the share price of a major oil company.

In addition to the increase in basic economic demand, there is also a speculative gain from owning shares of oil companies.  Due to the quantitative easing policies of the central bankers around the globe, speculators flee paper money in favor of oil, gold, silver, and other commodities.  That naturally drives up the price of oil.

According to some experts, oil is trading at a 50% premium due to the buying of speculators around the world.

Each of these oil companies has different reasons to be bullish.  Chevron is a well-run company that generates tremendous cash flow and is up for 2013.  For those looking to buy on the rebound, BP is starting to struggle back from its legal woes.  When Occidental Petroleum works out its corporate governance issues, it could take off in share price.  Eni, an Italian firm, is down due to the woes of Europe.

All pay healthy dividend to protect against a downturn.  The yield from BP is over 5%.  Eni pays a 4.61% dividend.  The income stream from Chevron is 3.26%.  The shareholders of Occidental Petroleum enjoy a 2.61% dividend payout.  All of these oil companies have ample cash to increase the dividend and finance stock buybacks to reward shareholders.

As detailed in the previous article, Total SA has the same time allure for investors in the energy sector.  The chart below shows how Chevron has surged, up 18.53% for the last month of market action.



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