Merrill Lynch Adds High-Yielding Energy Stock to US1 Best Ideas List
This top energy stock is another one of the higher yielding domestic ones in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. It is one of the largest U.S. oil and gas companies, based on equity market capitalization.
Occidental’s midstream and marketing segment gathers, processes, transports, stores, purchases and markets hydrocarbons and other commodities in support of Occidental’s businesses. In addition, the wholly owned subsidiary OxyChem manufactures and markets chlor-alkali products and vinyls.
Many analysts feel that the company faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year end 2014 was estimated at around $1.7 billion, and a whopping $11 per share of cash available for buy backs. The company announced recently a deal with Ecopetrol to invest up to $2 billion over the next decade to increase production at the La Cira-Infantas oil field in Colombia. According to reports from Reuters, the new round of investment will increase production in the region by more than 200 million barrels.
Occidental shareholders are paid an outstanding 4.11% dividend. The Merrill Lynch price target is $95. The consensus target is $78.67. Shares closed on Tuesday at $72.58.
This is the world’s largest international integrated oil and gas company, and it reported better second-quarter revenue numbers, but earnings came in below Wall Street estimates. Exxon Mobil Corp. (NYSE: XOM) reports third-quarter numbers next week. Merrill Lynch sis very positive on this energy sector play for the long term, as the overall corporate strength of the massive integrated giant plays a significant part in the its usually solid earnings reporting pattern.
Merrill Lynch has stressed in the past the company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that many others on Wall Street don’t fully appreciate, as the segment contributes an estimated 16% of overall total revenue. Very solid reasons for adding the stock to a long-term growth portfolio are that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation.
Exxon investors are paid a very sizable 3.65% dividend. The Merrill Lynch target is $100. The consensus price objective is lower at $81.84. Shares closed trading on Tuesday at $80.83.
All these large cap energy leaders offer investors the kind of total return that can add up to long-term gains. In addition, to enhance total return investors can write covered calls on the positions and generate extra income. With all of them trading way below 52-week highs, they continue to make good sense now.