On Sept. 14, two major oil sites in Saudi Arabia were attacked, leading to a 5% loss in the supply of crude across the globe. This has obviously also affected the stock prices of oil and gas companies. A rise in the price of oil should generally benefit these businesses, but buying a stock when it’s at the top is not a good decision. That’s why you need to identify companies that are not solely engaged in production. Here are two stocks that are ideal for the long term…
- Royal Dutch Shell (NYSE:RDS-A)
- EOG Resources (NYSE:EOG)
The table below shows both stocks’ movement over the past month.
IMAGE SOURCE: YCHARTS
Impressive dividends at Royal Dutch Shell
Some of the big companies are producers of oil, but they also boast distribution and marketing operations that keep their stock prices less susceptible to major swings. Royal Dutch Shell is an ideal investment for those who want to restrict the volatility of their portfolio and for investors who are on the lookout for a good dividend payout. Shell’s dividend yield is high, at 6.5%, and it should be safe even in a price downturn — unlike many of its competitors, Shell did not cut its dividend during previous slumps.
The stock is enjoying an attractive valuation, and investors are used to the company knocking its earnings numbers out of the park. At 11.7 times earnings, Shell is valued much lower than many of its peers. Total earnings were $24.4 billion in 2018, and $6.8 billion came from the upstream sector (the operations stage, involving exploration and production).
Shell has the capacity to start up new assets, and as these endeavors progress through the ramp-up stage, they should bring high earnings in the future.
Shell’s operating cash flow of $10.5 billion generated organic free cash flow of $6.2 billion in the quarter. This easily covers the dividend of $3.9 billion paid this quarter, as well as share buybacks worth $2.15 billion. This stock is a dividend payer, a strong outperformer, and a good buy.
IMAGE SOURCE: YCHARTS
EOG Resources: High quality, strong returns
One of the largest U.S. production and exploration companies, EOG focuses on…
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