A major reason to invest in Big Oil stocks like Statoil ASA (NYSE: STO), the Norwegian energy firm, is the answer to a simple question: When was the last time a Big Oil entity went bankrupt?
Big oil stocks like BP PLC (NYSE: BP), Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), and others have fallen in price.
That makes each a more attractive long term investment. The outlook for oil and natural gas firms is very solid. The demand for energy will increase. Until that catches up with the stock price, there will be down periods. That is certainly happening with Statoil ASA which is off for the last month and quarter of market action (chart below).
But it has been a good year for Statoil ASA, has it has soared more than 20 percent for 2014.
As with Big Oil firms, high growth is not in the future. Companies like ExxonMobil and Chevron are simply too big. It is the same with Statoil ASA, which has a market capitalization of close to $90 billion. But has with BP, Chevron, ExxonMobil and others in the sector, the shareholders of Statoil ASA can look forward to steady growth in the future.
That will add to an already strong dividend yield.
At present, the dividend yield of Statoil ASA is nearly 4.2 percent. That is more than twice the average for a member of the Standard & Poor’s 500 Index (NYSE: SPY). It is also higher than that for Chevron and ExxonMobil. BP PLC has a dividend yield of 5.14 percent, which is tough to beat. Income investors should also take comfort in the growth prospects for the dividend amount as Statoil ATA has very strong margins!
Statoil ASA is now trading around $27 a share.
The mean analyst target price over the next year of market action is $31.24. There is a miniscule short float, revealing that few on Wall Street expect the stock price to fall. Combined with the dividend yield, there should be a healthy total return for the long term shareholders of Statoil ASA.