3 International Oil Majors to Consider
Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When an investor decides to research an energy company, the usual suspects Exxon Mobil and Chevron usually come to mind. While those are no doubt great companies, it’s worth noting their international counterparts are no slouches, either. The ongoing European debt crisis has restrained the valuations of many highly profitable European companies. If you’re an investor who believes that the global economy is on the track to recovery and that Europe will eventually get its act together, these oil majors might be worth further consideration.
Total (NYSE: TOT) is a French-based oil company with a $116 billion market capitalization. Total pays a rock-solid dividend of 5 percent. Total trades at a trailing price-to-earnings ratio of only 8, and its share price is exactly where it was in November 2008, the depths of the financial crisis. Total’s dividend is well-supported, as the company carried a payout ratio of only 45 percent in 2011.
Total reported solid results for the first half of 2012, with sales increasing 10 percent and cash flow from operations increasing 6 percent year over year (as measured in euros). Return on equity for the first six months of the year was 17.5 percent. Total is executing on new initiatives in Thailand, the Norwegian Sea, and Italy, which should drive production growth going forward.
Royal Dutch Shell (NYSE: RDS-B) shares a similar valuation profile as Total, but is much larger. Shell has a market cap north of $220 billion and a trailing P/E ratio of 8. Shell is based in the Netherlands and carries a dividend yield of nearly 5.3 percent. Shell has had much better share price performance than many of its European peers, having increased 18 percent since 2010.
Shell has had a challenging 2012. Third quarter cash flow from operations dropped 18 percent year over year. Through the first nine months of 2012, income attributable to shareholders dropped 18 percent as well. The company did, however, raise its dividend by more than 2 percent during the year. Shell will pre-announce fourth quarter and full-year 2012 results on Jan. 31, and investors would be wise to monitor how the company performed.
Eni (NYSE: E) is an oil major based in Italy with a market value of $90 billion. Eni trades at a trailing P/E ratio of slightly greater than 9 with a dividend yield of about 4.5 percent. Eni is currently sitting close to its 52-week high of $50 per share, after plunging to $37 during the summer.
Eni reported solid results for the first nine months of 2012, with adjusted operating profit up nearly 14 percent versus the same period in 2011. Production results were good through the first three quarters, with oil and natural gas production up 8 percent. In addition, the company announced new licenses in Liberia and an expanded presence in Asia to drive future growth.
Each of these companies has exhibited more volatility than the U.S. based stocks but could provide greater returns. For investors looking for geographical diversification, modest valuations, and solid dividend yields in the energy sector, these companies may be a great place to look.
Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total SA. (ADR). 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!