Despite a big fourth-quarter sell-off in the benchmark pricing of crude oil that was brutal, dropping the price of West Texas Intermediate (WTI) from a high of $76.41 on October 3 to a low of $42.53 on Christmas Day, a stunning 44% drop, January has been much better for energy investors. In fact, WTI closed Friday at $55.26, a rise of 30% from the late December lows.
Despite the solid increase in the price of oil, the top stocks that were murdered during the fourth-quarter sell-off have not gone up on a percentage basis anywhere near as much, and they are still offering growth and income investors great entry points on the best companies.
We screened our 24/7 Wall St. research database, looking specifically at the large-cap dividend stocks, and found four that look like solid picks now, especially with the potential for larger cuts in OPEC production and a possible end to the trade issues with China.
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.
Jefferies has a Buy rating on the shares, and the stock is on the firm’s Franchise List of top stocks to buy. The fourth-quarter profit topped expectations as lower expenses offset a drop in earnings in Chevron’s main businesses. Earnings jumped 20% to $3.73 billion, or $1.95 a share, but the company generated $42.35 billion in revenue, compared with the $46.13 billion forecast by Wall Street.
Chevron shareholders are paid an outstanding 4.02% dividend. The Jefferies price target for the shares is $147, and the Wall Street consensus price target is lower at $138.54. The stock closed Friday’s trading at $118.37 per share.
This company remains a top energy pick and also posted some solid fourth-quarter results. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
The company reported a strong earnings beat, though here too revenue missed analysts’ estimates. Exxon reported earnings of $1.41 a share, well ahead of the consensus estimate of $1.08. Revenue of $71.89 billion came in below the $72.4 billion forecast by analysts.
Exxon shareholders are paid a very solid 4.32% dividend. Merrill Lynch has a price objective of $100, while the posted consensus target was last seen at $82.99. The shares ended trading at $75.99 apiece on Friday.