Big Oil, Add It to Your Dividend Portfolio

Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Dividend taxes didn’t go up quite as much as was publicized in the latter end of 2012. The current tax rate on dividends in the United States stands at 15%, if those dividends are qualified. Finding strong dividend paying companies is usually the issue when it comes to investing, but this article aims to target that with a look at one of my favorite sectors.

There’s one sector that provides some strong companies with incredible profits and big dividends year after year, the oil & gas industry. Atop this industry is ExxonMobil (NYSE: XOM), one of the largest public companies on the planet. Sick of boring old Exxon? How about a quick look at Chevron (NYSE: CVX) or ConocoPhillips (NYSE: COP)?

The Industry Titan

ExxonMobil is the oil & gas titan. The company has operations around the globe and they make a pretty penny manufacturing petrochemicals, plastics, aromatics, and a range of other specialty products.

ExxonMobil trades with a market cap of $413 billion, that’s pretty big! The dividend is pretty big too, paying $2.28 per share for a 2.5% yield. The one thing that makes Exxon appealing to me is the 9.6 P/E ratio, a pretty low P/E ratio for a pretty solid company.

With Exxon being such a big company, they don’t see as much growth as some smaller companies out there. EPS growth at Exxon is 3.56% over the last five years and revenue growth is 4.92%. The dividend at the company has been growing quite nicely though, a solid 7.7% over the last five years. Another interesting figure of note to investors should be the 0.88 price to sales ratio.

Half the Size

Chevron may carry a market cap that’s about 50% of counterpart Exxon but that definitely doesn’t take away from their investment worthiness. Chevron engages in similar business to Exxon, oil & gas. They also provide a variety of services to the oil & gas division as a whole.

The market cap at this tiny giant is $225 billion, obviously smaller than that of Exxon. One thing that isn’t smaller at this Californian Company is their yield that is currently 3.13%. Chevron’s P/E ratio is a little lower than Exxon’s at 9.43, both companies are below the average P/E of the S&P 500.

Chevron, also being a big company, doesn’t have astronomical growth. The five year average EPS growth is 7.31%, the revenue growth is a pitifully small 2% over those same five years. The dividend is showing some great growth over the time period though, a solid 7.88% five year gainer.

Half it, Half it again, Take a Little More Away

If you start at Exxon and make it to Chevron with the half, you’d have to half the Chevron market cap again before you end up at Conoco. Conoco has a $72.29B market cap making it the largest independent pure exploration and production company in the world.

Despite being the smallest company of the bunch, it does offer the largest dividend with a yield of 4.43%. The P/E at Conoco is a little higher too coming in at 10.71, a P/E that’s still below the average in the S&P 500.

With the spinoff of Phillips66 last year we’re left with shaky numbers for growth and we can’t really look back at the last five years for this company. Estimates on quarterly figures do show drops over the next two quarters though, something that potential investors should definitely look out for. The dividend may make this stock worth a purchase though; the average growth over 5 years has been 10.35%, pretty good for a large, stable company. 

Ash1402 owns shares of ConocoPhillips. The Motley Fool recommends Chevron. The Motley Fool owns shares of ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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