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Posted at 04/6/2021 18:25 by the grumpy old men Is Royal Dutch Shell Stock a Buy?Shell had a solid plan for the future. Or at least it did until things got a little more complicated. What should investors do now? Reuben Gregg Brewer (TMFReubenGBrewer) Jun 4, 2021 at 11:25AM Author Bio Royal Dutch Shell (NYSE:RDS.B) is one of the largest integrated energy companies on Earth. That has put it in the crosshairs of environmentalists looking to take on global warming. The company has started to do something about this issue, but it may not be enough to satisfy detractors. That could make life much more difficult for Shell and its shareholders. The big change Shell made the very difficult decision in 2020 to cut its dividend by a huge 65%. There were two reasons why the giant energy company took this step. First, drilling for oil requires a lot of capital investment, and at the time weak oil prices were making it difficult to fund spending needs. Second, the company announced plans to alter the makeup of its business, shifting toward growth in cleaner energy businesses and reducing its emphasis on oil. A smiling person in front of wind turbines. Image source: Getty Images. That second announcement was notable, as it meant that Shell had heard what investors, governments, and environmentalists were saying about reducing carbon and it was taking action. Some of its peers, notably Chevron and ExxonMobil were, and for the most part still are, dragging their feet on this front. Shell's goal is to get to net zero carbon by 2050, with interim goals of a 20% reduction by 2030 and a 45% reduction by 2035. There are a lot of moving parts to this plan, but it entails reducing oil production, increasing natural gas exposure, and ramping up investment in renewable energy. Shell is not new to the clean energy space either, so it has some expertise to build off of. The goals seem reasonable, but there's one key thing investors have to remember -- the oil business, though shrinking, is helping to fund the transition to a cleaner future. A wrench in the gears Everything seemed lined up for Shell. It had even gotten back to increasing its dividend, now having raised it twice since the cut. That was meant as a sign to investors that the company was financially strong and could be trusted to address clean energy concerns and maintain a growing dividend over time. Based on shareholder proxy voting, investors appeared pleased with the direction the company was heading. Then Shell lost a court case in Europe around its environmental impact. TOT Dividend Per Share (Quarterly) Chart TOT Dividend Per Share (Quarterly) data by YCharts The big takeaway from the case is that Shell was told to increase the pace of its clean energy transition. The court mandated target for carbon emission reduction was 45% by 2030. That pushes forward the 2035 goal by five years, but means more than doubling the carbon reduction originally planned for 2030. This is a massive change. The company responded by outlining the steps it has taken so far and plans to take in the future. And by saying it will appeal the decision. That is the logical step for Shell, but investors need to consider what happens if it loses this fight. Most notably, it will likely have to divest more oil assets to meet the court's mandate. That means less revenue to support the shift toward clean energy. In turn, this will probably lead to increased use of the balance sheet to fund the transition. That is not an ideal solution. What to do about it? At this point, nothing is likely to happen in the near term. However, investors looking for a long-term energy investment might want to step back here and rethink how they go about putting their money to work. This isn't to suggest that Shell is a bad company, only that the court loss raises the risks for this energy company in an unpredictable way. The best alternative right now is likely Total (NYSE:TOT), which is going down a similar clean energy path, has maintained its dividend, and has shareholder support for its transition. Alternatively there is BP, but the company's 2020 dividend cut and high leverage compared to peers are issues that some may, justifiably, find concerning. That said, be prepared, if Shell does end up losing this fight, it is likely that other energy names will find themselves facing similar problems down the line. Should you invest $1,000 in Royal Dutch Shell plc right now? Before you consider Royal Dutch Shell plc, you'll want to hear this. Our award-winning analyst team just revealed what they believe are the 10 best stocks for investors to buy right now... and Royal Dutch Shell plc wasn't one of them. The online investing service they've run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys. See the 10 stocks *Stock Advisor returns as of May 11, 2021 This article represents the opinion of the writer, who may disagree with the “official̶ Reuben Gregg Brewer owns shares of Total SA. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. |
Posted at 21/4/2021 09:43 by the grumpy old men 04/292021 First Quarter 2021 Results 05/28 2021 Annual Shareholders' meeting 2021 06/24 2021 Ex-Dividend date for the 2020 Final Dividend 07/29 2021 Second Quarter and First Half 2021 Results 09/21 2021 Ex-Dividend date for the 1st 2021 interim Dividend 09/28 2021 Investor Day 2021 - Total Strategy and Outlook 10/23 2021 VFB investor fair in Antwerp (Belgium) 10/28 2021 Third Quarter 2021 Results 01/03 2022 Ex-Dividend date for the 2st 2021 interim Dividend 03/22 2022 Ex-Dividend date for the 3rd 2021 interim Dividend 06/22 2022 Ex-Dividend date for the 2021 Final Dividend |
Posted at 09/3/2021 08:46 by ariane Oil supermajors spent almost $50bn to ‘please investors’ in 2020, report findsFeatures & AnalysisOil & GasPetrochemicals By James Murray 08 Mar 2021 The world’s five largest private-sector oil and gas companies – ExxonMobil, Chevron, BP, Total and Shell – collectively spent $49.9bn on shareholder dividends and share buybacks last year Oil pump The oil supermajors generated $20.5bn from their core business operations in free cash flow throughout 2020 (Credit: Pixabay/ArtTower) The oil supermajors combined to spend almost $50bn on payouts to their investors in 2020, according to a report. The analysis by the Institute of Energy Economics and Financial Analysis (IEEFA) shows that the world’s five largest private-sector oil and gas companies – ExxonMobil, Chevron, BP, Total and Shell – collectively spent $49.9bn on shareholder dividends and share buybacks last year. The firms generated $20.5bn from their core business operations in free cash flow throughout 2020 – marking a cumulative gap between free cash flows and shareholder payouts of $29.4bn, which is almost triple the previous year’s deficit. “These results spotlight a harsh reality,” said Trey Cowan, an IEEFA energy analyst and co-author of the report. “Investors can no longer count on the oil and gas supermajors to generate abundant, sustainable cash returns.” Four of the oil supermajors failed to generate enough cash to cover payments to investors The report highlights that during 2020, four of the companies failed to generate enough cash from their primary business – selling oil, gas, refined products, and petrochemicals – to cover their cash payments to shareholders. Texas-based ExxonMobil paid $17.8bn more to shareholders during the year than it generated from its core business operations, while California-headquart Anglo-Dutch multinational Shell was the only supermajor to buck the trend, generating an $8bn cash surplus. But to do so, the company reduced dividends by two-thirds – its first per-share dividend cut since 1945 – and suspended share buybacks and slashed capital expenditures by 28% year-over-year. The report found that the five companies have reported $325bn in free cash flows over the past decade while rewarding shareholders with a whopping $561bn in share buybacks and dividends. It added that the supermajors have funded their “investor-plea It highlights that Standard & Poor’s Global Ratings lowered the ratings of both ExxonMobil and Chevron to AA-, noting that the industry faces a “more difficult operating environment”. “Generous dividends and share buybacks give the globe’s largest private oil and gas companies a veneer of blue-chip financial performance,” said Clark Williams-Derry, an IEEFA financial analyst and co-author of the report. “But closer examination reveals an underlying financial weakness.” |
Posted at 09/2/2021 08:24 by ariane The Board of Directors met on February 8, 2021, and decided to propose to the Shareholders' Meeting, which will be held on May 28, 2021, the distribution of a final dividend of 0.66 EUR/share for fiscal year 2020, stable compared to the three interim dividends paid for fiscal year 2020.Given the three interim dividends of 0.66 EUR/share previously decided by the Board of Directors, the annual dividend for the fiscal year 2020 will amount to 2.64 EUR/share. Subject to approval at the Shareholders' Meeting, this final dividend will be paid in cash exclusively, according to the following timetable: Shareholders ADS holders Ex-dividend date June 24, 2021 June 22, 2021 Payment date July 1(st) , 2021 July 16, 2021 About Total Total is a broad energy company that produces and markets fuels, natural gas and electricity. Our 100,000 employees are committed to better energy that is safer, more affordable, cleaner and accessible to as many people as possible. Active in more than 130 countries, our ambition is to become the responsible energy major. * * * * * |
Posted at 10/12/2020 05:51 by sarkasm 3 Great Reasons to Buy This Oil Giant Despite Investor FearsInvestors seem to think that oil is dead, but that's not true. Here's a great way to invest in this out-of-favor sector. Reuben Gregg Brewer Reuben Gregg Brewer (TMFReubenGBrewer) Dec 9, 2020 at 9:04AM Author Bio The world is shifting away from carbon fuels and toward clean energy sources like solar and wind. That isn't in dispute, but it isn't the whole story, either. While clean energy is growing, oil and natural gas are still vital and necessary. That's exactly why France's Total (NYSE:TOT), and its fat 7% dividend yield, could be one of the best options for investors in the energy patch. Here's what you need to understand. 1. Oil is not dead Even the most aggressive clean energy projections out there recognize that oil and natural gas are going to remain important to the world's energy markets for decades to come. The logic isn't complicated, either. You can't simply replace the current infrastructure overnight -- it will take time. ExxonMobil (NYSE:XOM), for example, has highlighted that it took 100 years for oil to displace coal as the biggest player in energy. While this transition may be quicker, there's still a long way to go before carbon fuels are dead. A man turning valves on an energy pipeline. Image source: Getty Images. In fact, natural gas demand is expected to remain fairly strong even as oil demand declines because the cleaner burning fuel is being used to help the transition toward the low carbon future. Total is committed to its oil and natural gas businesses, looking to focus on its lowest-cost opportunities so it can compete even if energy prices remain low. This is important, because the company has stressed multiple times that it believes its dividend is sustainable even if oil prices average around $40 a barrel. Meanwhile, natural gas is expected to take on a more prominent role in the company's energy mix over the next decade (growing from 45% to 50% of sales) as Total looks to provide the world with the energy it wants most. 2. More than carbon As natural gas is growing in importance at Total, oil will be decreasing, dropping from 50% of sales to 35%. Making up the balance will be the company's "electrons" business, which will expand from 5% of sales to 15%. This isn't a new business shift, either -- Total has been investing in clean energy and electricity assets for some time now. That includes things like solar and wind power, electric vehicle charging stations, and even European utility assets. The key is that Total is using its cash cow energy business to fund its growth into the "electrons" space. Adding to the allure here is the fact that this trend hasn't slowed down because of the global pandemic. As noted above, Total is very comfortable with oil hovering at relatively low levels while it continues to change along with the times. A key factor in that is its balance sheet. While long-term debt comes in at around $61.5 billion, the company also has roughly $30.5 billion in cash on hand. Total pegs its net debt to capital ratio at a fairly modest 22%. When you look at that number, there's little reason to fear that Total won't be able to adapt with the world around it. 3. Out of sight, out of mind But why Total over other integrated energy giants? For starters, it has stated a willingness to hold the line on its dividend while it shifts toward clean energy. Peers BP and Royal Dutch Shell both cut their dividends when they announced similar transition plans. Second, Exxon and Chevron have both made clear that they are going to be sticking to oil for now. Total is taking a more middle-of-the-road approach, which, as you might expect, hasn't garnered it much attention. And third, the real point here, Total's business is light on the Americas. In fact, the Americas, which includes North, Central, and South America, make up just about 12% of Total's production, and 23% of its petroleum product sales. TOT Chart TOT data by YCharts So as a new administration comes into the White House openly calling for curtailments in U.S. energy production, there's little risk that Total's business will be materially disrupted. Its business in Europe, Asia, the Middle East, and Africa provide ample diversification. Moreover, it will avoid much of the headline risk that its U.S. peers will likely face. In fact, Total doesn't make headlines very often at all in the United States. Not being a big name in the U.S. market is a part of that, but so too is its kind of boring plan to shift slowly toward clean energy. As the U.S. media decries the evils of oil giants like Chevron and Exxon, and the investment world focuses on the recent dividend cuts at BP and Shell, Total looks like a forgotten stepchild. That makes it a little easier to own, since you don't have to deal with the negative press. More than three This list of three reasons to like Total is really more like six or seven reasons shoved into three broad boxes. To boil it down, though, Total is quietly going about running its diversified "cash cow" energy business in a way that should both support its generous dividend and fund a slow and steady transition toward clean energy. If you don't mind collecting a 7% dividend yield while it executes this plan, even if it doesn't get many accolades for its efforts, Total could be a great option for you. |
Posted at 30/10/2020 07:46 by waldron TOTAL: Dividend Declaration30/10/2020 7:37am UK Regulatory (RNS & others) TIDMTTA Total Maintains the Third 2020 Interim Dividend At EUR0.66/share Total (Paris:FP) (LSE:TTA) (NYSE:TOT): The Board of Directors met on October 29, 2020, and declared the distribution of the third 2020 interim dividend at EUR0.66/share, stable compared to the first and second 2020 interim dividends. This interim dividend will be paid in cash exclusively, according to the following timetable: Shareholders ADS holders Ex-dividend date March 25, 2021 March 23, 2021 Payment date April 1, 2021 April 19, 2021 |
Posted at 06/7/2020 14:23 by waldron Total’s CEO Pouyanne plots successful course while competitors stumbleBy Francois de Beaupuy on 7/6/2020 Total CEO Patrick Pouyanne Total CEO Patrick Pouyanne PARIS (Bloomberg) -- Europe’s oil giants came into 2020 promising shareholders they can “do it all” -- maintain generous dividends, keep the crude flowing and make a historic shift toward clean energy. Only one of them may succeed. Since the coronavirus pandemic wiped out oil demand, Royal Dutch Shell Plc shocked investors with its first dividend cut since the Second World War, while BP Plc announced 10,000 jobs cuts and the sale of its chemical business as debt soared. But Total SA has so far weathered the storm, and investors are confident Chief Executive Officer Patrick Pouyanne can avoid his rivals’ stumbles. They see the French company as an early adopter of clean energy, with multi-billion investments in solar, wind and batteries, but also a rare haven in an industry shattered by the slump in energy prices. “Total has probably the best balance sheet among the majors,” having spent its money wisely in recent years, said Laurent van Tuyckom, who manages high-dividend funds at Degroof Petercam Asset Management in Brussels. “We’re much more cautious on other heavyweights of the industry.” Weathering The Storm Total has taken steps to mitigate the effect of the downturn. It has cut costs, suspended a plan to increase its dividend by 5% to 6% per year, halted share buybacks, and given investors the option of taking the final quarterly dividend for 2019 in shares instead of cash. It also announced a plan to eliminate 1,000 jobs in France at a petrochemicals unit, and potentially more abroad. Those measures will save $7.5 billion this year, meaning the company can fund its major oil and gas projects, invest as much as $2 billion in low-carbon assets and keep paying its dividend even if oil remains at about $40 a barrel, Pouyanne has said. The payout will rise again when the economic situation has normalized, maybe from 2022, he said. Asset managers are confident Total can maintain its payout until the markets starts to recover. Most investors seem to agree, as the French company has the lowest dividend yield among its European peers, even after Shell’s two-thirds cut. Its peers are not so well placed. Eni Spa’s dividend is “more challenged than most peers at lower commodity prices,” said Biraj Borkhataria, an analyst at RBC Europe Ltd. JPMorgan said a cut to BP’s dividend is “well flagged”, particularly after Shell’s cut in April. Total can defend its dividend “even in an adverse scenario which would see the barrel staying around $40” said Regis Longlade, deputy chief executive officer of AG2R La Mondiale Gestion d’Actifs, which owns shares in Total and Shell. “It’s one of the most robust investment case in the industry. Total has one of the lowest breakevens in the market.” Total now needs less than $25 a barrel to cover its annual expenditure excluding the dividend payment, a drop of more than 75% compared to what it needed back in 2014. It is benefiting from spending cuts initiated since the previous down turn five years ago and investments in low-cost barrels. Its upstream operating expenditure has almost halved since 2014 to $5.4 a barrel, the lowest among the five supermajors, according to Total. Its gearing -- a measure of indebtedness -- has also halved. Writedown Woes Yet Total may not be immune to another feature of the current downturn -- multibillion dollar asset writedowns. Last month, BP announced as much as $17.5 billion of charges, its biggest in a decade, saying it expects the pandemic to accelerate the pace of transition to a lower carbon economy. Shell soon followed, warning that it expected a writedown of $15 billion to $22 billion. “BP has made a major step forwards with its writedowns and the issue of financial risks linked with fossil energies,” said Aurelie Baudhuin, head of socially responsible investing research at Meeschaert Asset Management. “That will inevitably spill over to the entire industry one way or another.” Total should follow that example, by giving more details on its roadmap to net zero emissions, and broaden its ambitions to incorporate a worldwide scope, said Baudhuin. Bruce Duguid, head of stewardship, EOS at Federated Hermes also wants Total to follow BP, which “recently changed their management and accounting assumptions to be consistent with a Paris-aligned outlook on demand.” Pouyanne is keeping pace with his rivals in the transition to clean energy. While Shell has set the ambition of becoming the world’s biggest power producer in 2030, Total has spent billions on electricity assets and plans to have more than 25 gigawatts of gross renewable generation capacity by 2025. It is targeting carbon neutrality for all its production and energy products used by its customers in Europe by 2050 or earlier. Total bought French battery maker Saft Groupe SA in a 950 million-euro ($1 billion) deal in 2016. It further diversified into power in 2018 with the 2-billion euro acquisition of Direct Energie SA, France’s third-largest utility. It recently announced plans to build batteries for electric vehicles in France and China, expanded in the power sector in Spain, India and Qatar, and announced its first deal in offshore wind in the North Sea. All these factors make Total one of the most attractive investments in the industry, especially since it trades at a discount to its peers, said AG2R’s Longlade. “Its low breakeven, its gearing among the lowest in the industry, and the ability of its management to adjust quickly to the crisis would justify that Total trades at a premium,” he said. |
Posted at 29/5/2020 13:31 by waldron Total Announces the Payment Terms of the Final 2019 Dividend Following the Shareholders' Meeting of May 29, 2020Alert Regulatory News: The Shareholders' Meeting of TOTAL S.A. (Paris:FP) (LSE:TTA) (NYSE:TOT), held today at its registered office under the chairmanship of Mr Patrick Pouyanné, declared a dividend of EUR2.68 per share for the financial year 2019. Given the first two interim dividends of EUR0.66 per share and the third interim dividend of EUR0.68 per share paid respectively on October 1(st) , 2019, January 8, 2020 and on April 1(st) , 2020, the remaining final 2019 dividend to be paid amounts to EUR0.68 per share. The Shareholders' Meeting also decided that shareholders will be given the option to receive payment of this final dividend in cash or in new shares of the Company, each choice being exclusive of the other. The share price of new shares to be issued as payment of the final dividend is set at EUR28.80. This price is equal to 90% of the average opening prices of the shares for the twenty trading days preceding the Shareholders' Meeting, reduced by the amount of the final dividend and rounded up to the nearest cent. The shares issued will carry immediate dividend rights, be admitted for trading on Euronext Paris and be fully assimilated with existing TOTAL shares. If the amount of the final dividend for which the option is exercised does not correspond to a whole number of shares, the shareholders may opt to receive either the number of shares immediately above, by paying a cash adjustment on the day they exercise their option, or the number of shares immediately below, plus a balancing cash adjustment. Shareholders and holders of American Depositary Shares ("ADS") will be given the option to receive the dividend either in cash or in new shares, by instructing their financial advisors, according to the following timetable: In 2020 Shareholders ADS holders Ex-dividend date June 29 June 25 Period to opt in for the payment in July 1 to July 10 June 29 to July 7 new shares (inclusive) (inclusive) Payment in cash or in new shares July 16 July 23 About Total Total is a broad energy Group, which produces and markets fuels, natural gas and low-carbon electricity. Our 100,000 employees are committed to better energy that is safer, more affordable, cleaner and accessible to as many people as possible. Active in more than 130 countries, our ambition is to become the responsible energy major. * * * * * |
Posted at 27/9/2019 16:08 by waldron SEEKINH ALPHAMost Investors Underestimate The Edge Of Total On The Other Oil Majors Sep. 27, 2019 9:09 AM ET| 5 comments | About: TOTAL S.A. (TOT) Aristofanis Papadatos Aristofanis Papadatos Oil & gas, portfolio strategy, value, bonds Aristofanis Papadatos (5,282 followers) Summary Total is the most resilient oil major to downturns. This is the most important feature investors should look for before purchasing an energy stock. Total also offers a higher dividend yield than Exxon Mobil and Chevron. In addition, the company just announced that it will raise its dividend by 5-6% per year instead of 3% in the upcoming years. Most investors who want to gain exposure to the oil majors tend to purchase Exxon Mobil (XOM), Chevron (CVX) or BP (BP). However, Total (TOT) has some striking advantages when compared to its peers. It is much more resilient during downturns, enjoys some competitive advantages, and offers a superior dividend. In this article, I will analyze why Total has the edge on the other oil majors. Resilience to downturns Due to the dramatic swings of the price of oil, the energy sector is infamous for its high cyclicality, which can cause devastating losses to investors during a downturn. In the fierce downturn of the energy sector between 2014 and 2017, some oil companies went out of business, while others, such as ConocoPhillips (COP), decimated their dividend. Consequently, the resilience of energy stocks to downturns is the most important feature that investors should examine before purchasing stocks of this sector. While all the oil majors avoided cutting their dividend in the above downturn, Total proved by far the most resilient oil major. Its earnings per share fell only 55% whereas those of Exxon Mobil plunged 75%. Moreover, Chevron and BP saw all their earnings evaporate, as they both posted losses in 2016. The main reason behind the superior performance of Total is its more integrated and diversified structure. Before the downturn, the upstream segment of all the oil majors used to generate approximately 90% of their total earnings. As a result, the other oil majors sold many of their refineries, failing to realize that those refineries were their hedges against a collapse of the oil price. Total maintained almost all its refineries and thus proved much more resilient than its peers when the price of oil collapsed, from $100 in 2014 to $30 in 2016. Whenever the next downturn in the sector shows up, Total will be the safest harbor in the sector thanks to its diversified asset portfolio. Growth prospects Like most oil majors, Total failed to grow its production during 2010-2014. However, thanks to a long series of investment projects, the company has returned to strong growth mode in recent years. To be sure, the oil major grew its production by 8% last year and is on track to grow its output by 9% this year. In addition, Total expects to grow its output by another 5% per year for at least the next three years. A few months ago, Total agreed to acquire the assets of Anadarko in Africa for $8.8 billion. This is the biggest acquisition of the company throughout the tenure of its current CEO. Thanks to these assets, Total will leverage its expertise in LNG in Mozambique as well as its expertise in deep-water offshore drilling in Ghana. Moreover, Total has greatly improved its asset portfolio since the onset of the downturn of the energy sector, about five years ago. The company has added about 7.0 billion barrels of reserves at a cost below $2.5 per barrel and expects free cash flows above $4.0 billion from these assets, at a Brent price around $60. These assets are thus expected to boost the free cash flows of Total by approximately one-third. Overall, Total has among the most exciting growth prospects in its peer group. Competitive advantages Total produces only a minor portion (less than 10%) of its natural gas in the U.S. and thus enjoys much higher selling prices than the price of Henry Hub. To provide a perspective, in 2018, the average realized gas price of Total was $4.78, which was 51% higher than the average Henry Hub price of $3.17. Moreover, Total has achieved a much lower production cost of oil than its peers. While all the oil majors have drastically reduced their operating expenses in the last five years, Total has cut its expenses to a greater extent. As a result, its current production cost of $5.7 per barrel is about half of the production cost of its peers. Total oil production cost Source: Investor Presentation Dividend Exxon Mobil and Chevron are the only two dividend aristocrats in the energy sector. However, Total offers a more attractive dividend than its peers. The stock currently offers a 5.6% dividend yield, which is higher than the 4.9% yield of Exxon Mobil and the 3.8% yield of Chevron. BP currently offers a 6.4% dividend yield, but it is much more leveraged than Total, primarily due to the excessive liabilities that resulted from its disastrous accident in 2010. BP has paid more than $65 billion (more than half of its current market cap of $129 billion) for its liabilities and will continue paying about $1.0-2.0 billion per year for several more years. Moreover, BP has paid the same dividend for five consecutive quarters, and hence, it is unknown if and when the company will raise its dividend. Moreover, Total just announced that it will accelerate its dividend growth in the upcoming years. The company had guided for 3% annual dividend growth, but it just raised the bar to 5-6% annual dividend growth, thanks to its strong free cash flows. The pre-dividend breakeven point of Total remains below $25 per barrel while its post-dividend breakeven point remains below $50 per barrel. Therefore, the dividend of Total seems absolutely safe for the foreseeable future. Overall, Total currently offers the most attractive dividend in its peer group. It has a higher yield than most of its peers and has committed to an attractive dividend growth rate for the years ahead. Valuation Total is trading at a forward price-to-earnings ratio of 11.0, which is lower than its 10-year average of 11.9. The stock is thus attractively valued. It is also worth noting that the stock has not fallen below the support of $40 in the last 15 years. This period includes two fierce downturns, namely the Great Recession and the recent downturn of the energy sector. It is thus evident that Total has very limited downside from its current stock price (23%) even in the most unfavorable business scenario. Even in that case, the dividend is likely to remain safe thanks to the resilient asset portfolio and the strong balance sheet of the company. Final thoughts While most income-oriented investors focus on Exxon and Chevron, Total has significant competitive advantages when compared to its peers. Total is by far the most resilient oil major during downturns; this is a key feature for this highly cyclical sector. Total also offers the most attractive dividend yield while it is also cheaply valued. Only the investors who have strong conviction for higher oil prices in the upcoming years should prefer other oil majors, such as Chevron and BP, as these companies are more leveraged to the oil price than Total. |
Posted at 13/2/2019 07:35 by grupo Total: The Fastest-Growing Oil Major Is Offering A 5.5% Dividend YieldFeb. 12, 2019 6:20 PM ET| 8 comments | About: TOTAL S.A. (TOT) Sure Dividend Sure Dividend Long-term horizon, newsletter provider, dividend investing, High Quality Dividends Sure Dividend (High Quality Dividend Growth Stocks) (25,806 followers) Summary Total grew its production by 8% last year and is poised to grow its output by 9% this year. Total is offering a 5.5% dividend yield, which is much higher than the yield of Exxon Mobil and Chevron. The article discusses a series of competitive advantages, which render Total by far the most resilient oil major during downturns. By Aristofanis Papadatos Total (TOT) is relatively overlooked among the 294 dividend-paying energy stocks. But Total is a high-yield oil stock with attractive growth potential. Since early October, the stock has incurred a 15% correction, primarily due to the 26% plunge of the price of Brent, from $84 to $62. As a result, the stock has become remarkably attractive and can now offer double-digit annual returns thanks to its 5.5% dividend yield and 9% production growth. As Total is also the most resilient oil major at low oil prices, investors should consider purchasing the stock. Business overview Total is the fourth-largest oil and gas company in the world based on its market capitalization of $145 B. Like the other oil majors, it is a fully integrated company and operates in four segments: Upstream, Downstream (mostly refining), Marketing and Gas, Renewables & Power. In 2018, these four segments generated 64%, 21%, 10% and 5% of the total earnings of the company, respectively. In 2018, Total exhibited impressive performance. It grew its output by 8% thanks to the start-ups of many new upstream projects and the ramp-ups of recently developed projects and thus reached an all-time high production level of 2.8 M barrels per day. The 8% output growth was the highest in its peer group. To provide a perspective, Exxon Mobil (XOM) saw its output decrease 4% in 2018 while Chevron (CVX) and BP (BP) grew their output by 7% and 8%, respectively. While Total and BP posted the same production growth rate, the former expects to grow its output by 9% this year whereas the latter expects a 5%-7% growth rate. Moreover, Total benefited from a 32% increase in the average price of oil in 2018 over prior year. Thanks to this tailwind and its production growth, Total grew its earnings per share by 23%, from $4.12 in 2017 to $5.05 in 2018. Growth prospects Like most of its peers, Total failed to grow its production during 2010-2014. However, it has returned to a solid growth trajectory thanks to 8 major start-ups in 2018-2019. Total grew its output by 8% last year and expects to grow it by 9% this year. In addition, it expects to grow its output by 5% per year for at least another three years. Moreover, Total has greatly improved its reserve portfolio since the downturn of the energy sector began, almost five years ago. Since 2015, the company has added about 7.0 B barrels of reserves at a cost below $2.5 per barrel and expects free cash flows above $4.0 B from these assets from this year, at a Brent price around $60. Given that the company posted free cash flows of $12.1 B last year, these assets will greatly boost its free cash flows, by approximately one third. Total Acquisitions Source: Investor Presentation Furthermore, Total is likely to benefit from somewhat rising oil prices in the upcoming years. The price of oil has temporarily plunged since early October, mostly due to a sell-off after the U.S. government distributed exceptions to its sanctions on Iran and thus essentially eliminated their effect on global supply. However, global demand for oil continues to grow at a solid pace. It grew from 98.4 M barrels per day in Q3-2017 to 99.8 M barrels per day in Q3-2018 so it is poised to cross the 100.0 M threshold for the first time in history. Thanks to decent global economic growth, oil demand will remain in an uptrend and will thus probably lead oil prices to somewhat higher levels in the upcoming years. Overall, Total is ideally positioned to grow its earnings per share in the upcoming years thanks to sustained production growth and an increase in the oil prices. We expect this oil major to grow its earnings per share by about 7% per year over the next five years. Competitive advantages – resilience to downturns Total enjoys a series of competitive advantages and thus it is by far the most defensive oil major. Its defensive nature was prominent in the 2014-2017 downturn of the energy sector, which resulted from the collapse of the oil price. The earnings per share of Total fell only 49%, whereas those of Exxon Mobil plunged 75% and Chevron and BP posted losses in 2016. The key behind the resilience of Total was its superior refining segment. During the rough years of refining (2008-2013), the upstream segment was generating about 90% of the total earnings of all the oil majors. Consequently, the other oil majors sold many of their refineries, failing to see that their refineries were their hedges against a plunge of the oil price. Total maintained almost all its refineries and thus it has reaped the full benefit from the high refining margins in the last five years. It is also worth noting that the refining earnings of Total incur an exceptionally low tax rate thanks to the tax code of France. This factor enhances the resilience of the results of the company in periods of low oil prices, when the refining segment generates most of the earnings of the company. Total also enjoys another competitive advantage when compared to its peers. It produces only a minor portion (less than 10%) of its natural gas in the U.S. and hence it enjoys a much higher average natural gas price than the price of Henry Hub. To be sure, in 2018, Total realized an average natural gas price of $4.78, which was 51% higher than the Henry Hub average price of $3.17. Moreover, Total has a much lower production cost than its peers. Since the downturn of the sector began in 2014, all the oil majors drastically reduced their production costs in order to somewhat mitigate the impact of the collapse of the oil price. However, Total outperformed its peers by a wide margin in this aspect and thus reduced its production cost to $5.7 per barrel, which is approximately half of the production cost of the other oil majors. Total Cost Cuts Source: Investor Presentation Overall, thanks to the above competitive advantages, Total has proven much more resilient than its peers during downturns. Given the high cyclicality of the sector, the importance of resilient performance during downturns cannot be overemphasized. Dividend Thanks to its strong business performance, Total raised its quarterly dividend by 3%, from €0.64 to €0.66. As a result, the stock is offering a 5.5% forward dividend yield. This is much higher than the 4.4% and 4.1% yields of Exxon Mobil and Chevron, respectively. Moreover, Total’s management has pledged to raise the dividend by another 3% next year. Furthermore, thanks to the above mentioned resilience of Total even under the most adverse business conditions, the dividend can be considered safe for the foreseeable future. Therefore, investors can initiate a position in this exemplary oil major at an attractive yield and rest assured that the dividend will keep growing. Valuation Despite the 9% production growth expected this year, we prefer to be conservative due to the dramatic swings of the oil price and thus assume just 3% earnings-per-share growth for this year, from $5.05 to $5.20. Given this conservative forecast, the stock is trading at a forward price-to-earnings ratio of 10.6. This is a remarkably cheap valuation level for this well-managed company. Moreover, the stock has traded at an average price-to-earnings ratio of 11.9 during the last decade. If the stock reverts to its average valuation level over the next five years, it will enjoy a 2.3% annualized gain thanks to expansion of its price-to-earnings ratio over this period. Final thoughts The steep correction of the oil price since early October has led Total to bargain territory. The company is growing its output at the fastest pace in its peer group while it also offers a markedly attractive 5.5% dividend yield. As a result, investors who purchase the stock at its current price are likely to enjoy double-digit total annual returns in the upcoming years thanks to 7% earnings-per-share growth, a 5.5% dividend yield and a 2.3% annualized expansion of the price-to-earnings ratio. Moreover, investors can rest assured that the dividend will remain safe even in the event of a downturn thanks to the impressive resilience of this oil major during downturns. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. |
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