When the oil pricing collapsed, many on Wall Street predicted that mergers and acquisitions would skyrocket as weaker companies became vulnerable. While there has been some deal movement, most of the majors are concentrating on projects that were already underway. In a new research report, while Cowen thinks bolt-on acquisitions under $10 billion to fill gaps in portfolios is possible, the analysts stay focused on three big stocks that have big dividends.
The Cowen team notes in the report that almost all the majors have different areas of focus, and those areas should keep them occupied for the near term. They also stay positive on three big oil companies that offer investors a degree of safety and outstanding dividends.
This stock is very solid story for investors looking to stay long the energy sector. Chevron Corp. (NYSE: CVX) sports a sizable dividend and has a solid place in the sector when it comes to natural gas. Some Wall Street analysts estimate the company will have a compound annual growth rate of over 5% for the next five years, and the stock trades at a modest valuation discount to some of its mega-cap peers.
Chevron management is aggressively pursuing cost saving initiatives, and it has already completed over 2,200 supplier engagements, with 700 more in progress. Cost savings and improving investor sentiment may be a key for the mega-cap integrated as it has struggled mightily over the past year.
Chevron is a company that the Cowen team sees as focused on current major projects, and probably not in the market for a major deal at this time.
Chevron investors are paid a large 4.125% dividend. The Cowen price target is $124. The Thomson/First Call consensus price target is $113.21. Shares closed Tuesday at $100.42.