Analysis of ConocoPhillips (COP)

Dividend Family Guy Ranking of ConocoPhillips (COP)

6/543


ConocoPhillips is a major multinational energy company sitting on a hefty market cap of 99 Billion Dollars and about $7.5 billion in cash.  Gee that is allot of money.  No wonder energy companies always seem to land in my top ten each month.  I had meant to write this earlier today but as luck would have it I worked an 11 hour day on an emergency.  As always as a busy family man I try to do my analysis when I have time and withing a 1 hour time box.

Value

The value rank of COP landed in at 100/543.    That has slightly improved since I did my screen at the beginning of the month.  But since my screen is based on the U.S.DividendChampions spreadsheet I am sticking with it.  The improvement takes place in the trailing twelve months price-to-earnings ratio.  It was at 12.67 but is now sitting at 12.4 at the time of this writing.  This has been steadily declining over the past month so it is presenting as a good value.  The price-to-sales was at 1.78 (TTM).  This tells me that for every dollar of sales it will cost me $1.78.  The closer this ratio gets to one the happier I am. 


Growth

Growth is sitting a little bit higher at 26 out of 543 companies that have been paying dividends for 5+ years. I tend to look at the past in my data vs. future growth.  It is very hard to predict future growth.  The past five years has shown an average of 21.1%.  That is tremendous and can be attributed to recovering economies and as always the price of oil.  The prediction is allot lower at 6.9%.  No more double digits but that is not uncommon in a company of this size.  Any growth at this size is a good thing.  They are lagging behind the rest of the industry at 3.11% 1 year growth rate vs. 3.83% for the industry.   

Quality

Out of the 4 categories I look at to determine the best overall stocks for my portfolio, quality came in last.  It had a ranking of 118/543.  The price-to-book ratio is sitting at 1.99.  I prefer it a little closer to 1 to ensure I am getting the best value. The debt-to-equity ratio is also a little high at .4.  Debt is part of the energy business as there is a need for a good chunk of cap-ex every year to keep assets current.  

Yield

52 out of 543 isn't bad.  It isn't the best yield rank either.  Those tend to go to the REITs and MLPs that have been increasing dividends year over year.  So for a common stock company I feel good about 52.  The yield was sitting at 3.22%.  My screen also filters out anything less than 3 percent (for now).  With a small portfolio I am looking to grow it fast over the next 5-10 years.  There is some risk with that approach but since COP is a dividend contender I am okay with it.  The past five year dividend growth rate has been nice at 13.3.  If that hangs around I can double it every 11 years or so.  I gave Dividend Life's spreadsheet a try so I hope I got it right.

What's the Talk?

With greenhouse gasses always being big talk COP could benefit from any laws put in place.  They are a major natural gas producer which is a cleaner fuel to burn.

Second quarter profits also rose from $2.05 billion a year ago to $2.08 billion ($1.65/share up to $1.67.).  Their year end was the end of June so it was up for the year as well.  I could not find any bad news so all the analysts reports provided to me by ShareBuilder are saying buy. 

I will have to watch this for dips and get my hands wet in some black oil.  I am still learning about determining the fair value for a stock so once I do I will include that as well.

Thanks for reading!

What price would you buy COP at?

Full Disclosure: Don't own this stock as of this writing.

Image courtesy of creativedoxfoto / FreeDigitalPhotos.net

Comments

  1. Great analysis. I looked at COP, never really understood the oil industry as they have to continuously spend money to discover oil. So oil companies go into the too hard pile for me. Are you worry that COP profits are dependent on the price of oil? If oil prices go lower so will profits. Think the supply of oil and natural gas is increasing.

    Cheers!

    ReplyDelete
    Replies
    1. Hi Henry,
      That is one worry I have. However the payout ratio is around 37% so even if they have a bad year or two the dividend is unlikely to be cut. Thanks for dropping by.
      DFG

      Delete
  2. Thanks for sharing your analysis of COP. It has been on the back of my mind for a while because of the low PE and pretty decent current yield. As we all know, value in this market is hard to come by except it seems in the energy space and financials. I'd probably wait to buy COP since it had a tremendous run up since the beginning of 2014 and still seems a tad high especially in this rocky market.

    ReplyDelete
    Replies
    1. Thanks for the feedback DivHut. I am still working on how best to determine the fair value for me for companies. Any good sights with tips on calculating this?

      Delete
  3. Hi DFG,

    Thanks for posting your analysis - I'm looking to make a sharebuilder purchase in the energy sector this week so it's a timely article. I already own CVX and XOM but I like to look at a couple of outside stocks too.

    Thanks for using my spreadsheet too, you were right with the 11 years; I just hope I'm right with all that math! ;)

    Best wishes,
    -DL

    ReplyDelete
    Replies
    1. Just wanted to mention that there's a new version of the Dividend Champions list for download now dated 7/31 - it contains 550 entries now, up from last month's 543.

      Delete
    2. Hi DL,
      Yeah I just saw that as well. I will have to take a look and see how COP is positioned for this month.
      Thanks!

      Delete

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