Watch List of Cheap Stocks With Big Dividends

At YCharts, we’ve been writing repeatedly in recent months about oil stocks and their value relative to the overall market, or S&P 500, especially Chevron (CVX), which we earlier termed the stock of the moment based on value and income.

The big oil stocks mightn’t have been the initial topic of some YCharts articles, but after declaring bank loan ETFs or junk bond ETFs a risky proposition, or questioning the valuation of other dividend-paying stocks, we’ve often offered as income-producing alternatives the generous dividend yields and low PE ratios of integrated oil companies.

Your personal risk appetite, or your clients’ risk profile, could very well have kept you from considering oil stocks, and based on year-to-date returns you’re probably feeling pretty good about that. Other than Royal Dutch Shell (RDS.B) and ConocoPhillips (COP), these seven big oil companies have provided price returns bunched around the S&P 500, nothing to write home about.

XOM Chart

XOM data by YCharts

With their large dividends, the total returns have been somewhat nicer, but still nothing great.

XOM Total Return Price Chart

XOM Total Return Price data by YCharts

The reasons to consider big oil stocks, however, remain compelling. First off, as my colleague Carla Fried has written repeatedly, many other sources of investment income have been bid up and now hold greater risk than the reward justifies. (Watch the YCharts email for an upcoming article on utility stocks.) Carla has singled out bank loan ETFs like the PowerShares Senior Loan ETF (BKLN) and also junk bond ETFs like the Barclays High Yield Bond ETF (JNK). Carla has also warned that some steady dividend payers among consumer goods and retailing stocks have become pricey, naming Coca-Cola (KO), Colgate-Palmolive (CL), Procter & Gamble (PG) and Walgreens (WAG).

And with the market seeming pricey, lower-valued stocks provide some defensive posture. On the upside, as the economy picks up steam, we hope, demand for oil and gas should rise and that fattens oil company margins.

We’ve mentioned the big oil stocks as an alternative enough times that I set up a very brief watch list and loaded it into the YCharts Stock Screener as a handy reminder. In addition to Chevron, ConocoPhillips and Royal Dutch Shell, the list includes the usual suspects Exxon (XOM), Total SA (TOT), BP (BP) and Occidental Petroleum (OXY). On the screener linked above, I’ve ranked them by market cap and added forward PE ratio, dividend yield, payout ratio, year-to-date return and 5-year return.

XOM Dividend Yield (TTM) Chart

XOM Dividend Yield (TTM) data by YCharts

Just having the watch list set up makes it easy, when news or other events causes you to reconsider your investment mix, to quickly appraise the status of these stocks. I left off plenty of integrated oil companies, notably Russian stocks that are very cheap, because they bring a level of risk all their own. (If those valuations attract you, however, a market-beating fund manager like Russia, too.) But the U.S. and European big oil stocks, relative to the market, look pretty cheap.

XOM PE Ratio (Forward) Chart

XOM PE Ratio (Forward) data by YCharts

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

Read more articles about: Investing Ideas  oil   watch list   dividends   energy stocks   stocks that look cheap   dividend yields   income investing   stock screener   

blog comments powered by Disqus
Advertisement

Search Articles

Subscribe to YCharts Analysis

Advertisement

{{root.upsell.info.feature_headline}}.

{{root.upsell.info.feature_description}}
Start your free 14 Day Trial.

{{root.upsell.info.button_text}} No credit card required.

Already a subscriber? Sign in.