Saturday, August 9, 2008

Time to look at energy stocks?

It is time to look at at energy companies? I know may people would say oil and gas production companies are not solid dividend stocks but do they represent a good value. Oil is down around 20% from its high on July 3 and as oil has pulled back, energy stocks have dropped. This week, the S&P 500 energy sector dropped into bear market territory after declining more than 20% from its record highs in May.

As the world’s population increases, the United Nations projects 8 billion people by 2025, up from 6.6 billion today, it is also growing richer. Even in emerging markets, people are consuming more food and energy. China’s 1.3 billion people and India's 1.1 billion are moving towards middle class lifestyles and using more gasoline fueled vehicles and electric gadgets similar to developed nations.

I don't see any energy plans being proposed by world leaders that will eliminate the use of oil and gas over the next 10 to 15 years. I currently hold shares of Exxon Mobil but I am also adding another oil and gas production company as a hedge against raising oil and gas prices over the next few years.

My Pick: Devon Energy (DVN)
DVN is one of the largest independent US exploration and production companies primarily engaged in the exploration, development and production of oil and natural gas. DVN has been selling international assets with lower growth prospects to focus on higher growth assets such as Barnett Shale in Texas.The stock currently pays a dividend of .71% and the stock is trading for around $90 share which is down from its July 2 high of $127.43.

S&P rates DVN a 4 star buy rating and gives the firm an A- for quality ranking. They also have a 12 month target price of $137.

Disclose: The Div Guy owns shares of XOM and DVN.

This article was written by The Div Guy. You may email questions or comments to me at thedivguy@gmail.com.

4 comments:

  1. I personally prefer Husky Energy, seems like they have better returns... As for Devon isn't the dividend 0,71% instead of 7,1%???

    ReplyDelete
  2. pol,

    Husky does look like a very good selection. I used an S&P screen of stocks with a 4 or 5 star rating. HSE is not rated at this time by S&P. Yes, the dividend for DVN is .71% which is just less than 1%.

    ReplyDelete
  3. there is no panic selling on oil yet. so wait a bit more

    ReplyDelete
  4. I agree that the time to buy oil stocks will come, but may not be here yet. Not a bad time to buy Husky though, as the dividend will comfort you as you wait and you can always average down.

    ReplyDelete

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