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Energy Sector Outlook – Best Energy Stocks

S&P Capital IQ equity analysts have a positive fundamental outlook on the influential Integrated Oil & Gas sub-industry, as well as most of the sector’s other smaller sub-industry groups. We believe that oil prices will decline slightly from current levels, averaging $91.96/bbl. in 2012 and $89.51 in 2013 as global economic growth slows.

The Capital IQ consensus sees Energy sector EPS rising 11.2% in 2013 versus an 11.9% gain estimated for the S&P 500. According to Capital IQ, the sector’s recent valuation of 12.3X consensus estimated 2012 EPS is below the 500’s P/E of 14.0X, as oil price volatility keeps investors from assigning the sector too high a valuation, in our view. The sector’s P/E-to-projected five-year EPS growth rate (PEG) ratio of 2.1X is above the broader market’s 1.2X. This sector’s marketweighted S&P STARS average of 4.5 (out of 5.0) is above the S&P 500’s average of 3.8.

The S&P GICS Energy Index sector has advanced right up to key trendline resistance off the April 2011 highs, and therefore, we believe there could be a pullback in the near term. In addition, prices have rallied into the beginning of a heavy layer of overhead supply that runs from 540 to 570, and we think this resistance may also keep a ceiling on prices in the short term.

Both WTI and Brent are either at or very near large areas of overhead supply so we think oil prices could pause or correct. In addition, the COT (Commitment of Traders) data is showing high levels of bullishness for crude oil from large speculators (“dumb money”) and high levels of bearishness from commercial hedgers (“smart money”). Relative strength versus the 500 has bounced nicely since June, but the RS line remains in a downtrend off the April 2011 top.

The stocks listed below are all Bullish and priced below their fair value.

Click to enlarge





DK Delek US   Holdings Inc.
MPC Marathon Petroleum Corp
TSO Tesoro Corporation
CVX Chevron Corporation
STO Statoil ASA
HFC HollyFrontier   Corporation
VLO Valero Energy   Corporation
SXL Sunoco Logistics   Partners L.P.
LGCY Legacy Reserves Lp
CLMT Calumet Specialty   Products

Stocks Increasing Dividends to Buy Now

As the earnings season continues to look good, many dividend stalwarts are increasing their annual dividend payouts.  There are many companies increasing dividends but not all are stocks to buy.  I  used the equity summary score, a consensus of financial analysts at different firms, to determine that these stocks are rated Bullish or better.  For investors seeking dividend income, these stocks make great additions to your portfolio.

Coach (COH) dressed up shareholders with a 33% increase in its quarterly payout to 40 cents per share.  The new dividend will start being paid in July. The new dividend yield is 2.16%.  The luxury handbag, accessories and leather-goods maker has seen its profit grow for over two years on the strength of its North American direct-to-consumer businesses and global expansion. The company also is broadening its men’s business with more male-oriented products and by opening men’s stores in the U.S. and Japan.  COH has an equity summary score of 9.7 out of 10 for a Very Bullish outlook.

International Business Machines (IBM) reprogrammed its dividend with a 13% increase to 85 cents per share. The new payout will be coded on June 9 to shareholders of record as of May 10. The new dividend yield is 1.64%. This is the 17th straight year that IBM has increased its quarterly dividend, and the ninth year in a row of double-digit-percent increases.  IBM also authorized an additional$7 billion to buy back shares as the company looks to return more of its rising cash levels to shareholders.  IBM has an equity summary score of 9.7 out of 10 for a Very Bullish outlook.

Exxon Mobil (XOM) delivered a 21.2% boost in its quarterly dividend payment to 57 cents per share. The new payout will be made on June 11 to shareholders of record as of May 14. The new dividend yield is 2.65%. If Exxon Mobil’s CEO stays true to his word…and keeps the yield competitive, there should be further dividend increases before next year.  The company has increased its annual dividend every year for the past 30 years.  XOM has an equity summary score of 9.6 out of 10 for a Very Bullish outlook.

Chevron Corporation (CVX) engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream.  CVX unearthed an 11.1% increase in its quarterly dividend to 90 cents per share. The new dividend will start being paid in June.  The new dividend yield is 3.39%. CVX has a significant amount of cash in its balance sheet –$18.9 billion at the end of first quarter.  The company also announced it purchased $1.25 billion of its common stock in the first quarter 2012 under its share repurchase program.  CVX has an equity summary score of 9.4 out of 10 for a Very Bullish outlook.

Johnson & Johnson (JNJ) put a Band-Aid on its quarterly payout, increasing its dividend 7% to 61 cents per share. The new payout will be made on June 12 to shareholders of record as of May 29. The new dividend yield is 3.76%.  This is the 50th straight year the health-care products giant has decided to raise its payout to shareholders.  JNJ recently reported a higher first-quarter profit due to a foreign-exchange- related gain and lower expenses, though the currency impacts also weighed on sales.  JNJ has an equity summary score of 8.4 out of 10 for a Bullish outlook.

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