OIL: 1 Big Oil Dividend To Buy And 3 To Avoid

At first glance this looks like a terrible time to buy energy stocks. Oil prices are at historic lows, demand has pulled back, inventories are climbing, and global manipulators like OPEC and Iran are doing little to help.

But contrarian investing is successful because we invest against the herd and simple “first-level” notions.

I warned you to stay away from big oil when the goo was trading 50% higher, and I hope you listened. But oil prices will eventually find a bottom – and it’s almost time to get our big oil shopping list ready.

The S&P 500 pays just 2.3%, but the firms I’m talking about pay from 3.9% all the way up to 8.7%. And these management teams take their dividends seriously – they continue to reiterate their commitments to keeping their payouts. ConocoPhillips (COP) CFO Jeff Sheets recently said that “Our top priority is the dividend. A compelling dividend is a core element of our value proposition and we think it is still appropriate.”

Unfortunately for Mr. Sheets, bad economics trumped his top priority. Yesterday, Conoco announced it lost $3.5 billion in the fourth quarter – and it’ll be slashing its dividend by more than 60%.

Who will be next to drop the dividend? I’ve got a few likely candidates in the sector. But first, let’s talk about the safest payout even today…

Exxon Mobil Corporation (XOM) reported brutal fourth quarter earnings this week. Revenues fell 31.5% and earnings plunged 58% lower. That’s an earnings decrease of $501 million versus the prior quarter.

In the fourth quarter of 2014 the company realized a price of $63.30 per barrel of crude and $3.72 per cubic foot of natural gas. But last quarter, Exxon only received $34.36 and $1.80 respectively for the same fuel. That’s a 45% lower for crude and a 51% lowered in natural gas.

SOURCE: FORBES.COM