Royal Dutch Shell
This company has survived the seesaw in oil pricing as good as or better than any other major integrated. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.
Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.
In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.
Royal Dutch Shell recently announced the start of a $25 billion stock buyback program, and while second-quarter earnings were somewhat weak, free cash flow at the integrated giant remains strong.
Investors receive a huge 4.91% dividend. The $78 Merrill Lynch price objective is less than the $81.01 consensus figure. The stock traded at $65.15 Thursday morning.
This recently was added to the Merrill Lynch US 1 list of top stocks to buy. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that has a 74% ownership interest in its underlying master limited partnership, Williams Partners.
The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by liquefied natural gas exports, power generation and industrials. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.
Shareholders are paid a 4.46% dividend. The Merrill Lynch price target is $38. The consensus target is $34.22, and the shares traded at $30.25 apiece.
With oil hovering a few dollars under the $70 level, you can bet that the big integrateds are looking to produce and sell as much as possible, especially as the sanctions on Iran are totally put in place. These stocks are outstanding long-term buys for growth portfolios looking for income as well.
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