ExxonMobil Is a Rock-Solid Dividend Stock, but So Is This Dirt Cheap Value Stock That Paid $1.8 Billion in Dividends Over the Past Year
In addition to being the most valuable energy company in the United States, Exxon Mobil It is a consistent dividend payer, with more than 42 consecutive years of increased paymentsWith its diversified business model and sufficient cash flow to invest in organic growth, acquisitions and energy transformation, Exxon and its 3.3% yield are a compelling proposition.
However, midstream, refining, chemicals and marketing companies Philips 66 (NYSE: PSX) It also stands out as a good buy right now. The company does not operate an exploration and production business, making it significantly different from a major like Exxon or well-known upstream companies like ConocoPhillips or Occidental Petroleum.
Here’s why the Philips 66 is a reliable product Dividend Stocks It is an interesting opportunity, especially for investors who have sufficient exposure to exploration and production companies and who want to diversify their investments in oil and gas.
shifting her focus
Philips 66 has been hit hard by the COVID-19 pandemic – posting a massive $4 billion loss in 2020. For context, Chevron Philips 66 lost $5.5 billion in 2020, even though it is a larger and more diversified company than Philips 66. Philips 66’s stock price dropped like a rock, and it was clear that something had to change.
The company is cutting costs and rethinking its portfolio. It is divesting retail and marketing assets in Germany and Austria and is targeting $1.4 billion in operating cost savings by the end of 2024. Philips 66 hopes its lower cost profile combined with higher profitability will help it reach mid-cycle adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $14 billion by 2025, including returning more than 50% of operating cash flow to shareholders.
In the chart, Phillips 66 is keeping its capital and operating expenses low while increasing its profits. However, it is still making targeted investments. For example, it has invested heavily in converting its San Francisco refinery into a biofuels facility that can produce more than 50,000 barrels per day of renewable fuel.
In April, Phillips 66 announced that the complex was producing 30,000 barrels per day, and was on track to reach its target of 50,000 barrels by the end of the second quarter. The project came at a steep cost, but Phillips 66 believes it is the right move to ensure its portfolio is diversified and able to meet the downstream needs of the energy transition.
In short, Philips 66 is producing impressive results and has set clear expectations for shareholders through medium-term targets and some major investments in infrastructure.
Return capital to shareholders
As Philips 66 returns to growth in 2022, it has committed to returning significant capital to shareholders through dividends and buybacks. The company said it is on track to return $13 billion to $15 billion to shareholders between July 2022 and the end of 2024.
Since ConocoPhillips spun off its downstream assets to create Phillips 66 in 2012, Phillips 66 has raised its dividend at a compound annual rate of 16%, including a 10% increase in quarterly dividend to $1.15 a share in April. That raises Phillips 66’s annual dividend to $4.60 a share, representing a forward yield of 3.3%.
Phillips 66 is nowhere near the size of integrated oil majors like ExxonMobil and Chevron, which have assets both upstream and downstream. However, it still has a large dividend expense of about $1.8 billion a year. Impressively, Phillips 66 has spent more on buybacks, including $4.2 billion over the past 12 months. Phillips 66 is benefiting from a favorable period in the business cycle and rewarding shareholders directly.
The Philips 66 is worth a closer look.
Shares of Philips 66 are down 19% from their all-time high just a few months ago. But there’s reason to believe the stock now represents a buying opportunity.
The price-to-earnings ratio is 10.8, which is within its historical average range. The yield continues to grow and is already at an attractive level with a yield of 3.3%.
Phillips 66 is also an industry leader with the resources to make significant investments in new projects that could lay the foundation for future biofuel projects. Put all of this together, Phillips 66 is a high-quality dividend stock that is worth buying now.
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Daniel Folber The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has Disclosure Policy.
Exxon Mobil is a very strong dividend company, but this very cheap stock that paid $1.8 billion in dividends over the past year is the same thing. Originally posted by The Motley Fool
