Oil Opportunities

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My investing strategy is to take my excess money each month and buy attractive dividend growth stocks. The act of buying stocks every month is usually considered to be “dollar cost averaging” where your returns are going to average out from buying at both high and low prices throughout the year. While this applies to the broader market, it doesn’t account for the fact that each month there is usually a company or sector that is lagging behind the rest of the market and provides a discount. This means that as the market rises and falls, the intelligent investor is still getting a good deal.

For instance, over the past month oil prices have been dropping, and after OPEC made the decision not to cut production (and thus cause prices to rise by reducing supply), the big oil stocks like Chevron (CVX), BP, Exxon Mobil (XOM), and others have seen their prices fall 5% or more. This decrease in price also means an increase in entry yield. At the time of writing this, CVX’s entry yield is 3.76%, BP’s is 5.52%, and XOM’s is 2.91%. Earlier this year, I wrote about ConocoPhillips (COP). At that time (April), the entry yield was 3.9%, now it is up to 4.15%.

If you were thinking about adding oil stocks to your portfolio, now is the time. I’ve personally purchased new positions in CVX and BP. This is not a “once in a lifetime” opportunity, but it’s a strong example of how savvy dividend investors can get great deals throughout the year. Currently, the S&P 500 is at a new high for the year, but you can pick up these individual stocks at a significant discount.

Earlier this year, we also saw Target (TGT) suffering from some bad press after the data breach (Which I wrote about as well). Back then, Target’s entry yield was about 3%, and that wasn’t even the lowest price Target hit this year. In the past few months Target has regained it’s share price level, and even increased their dividend, but the current entry yield today is 2.85%. Hopefully, you readers snagged this one up at a good price like I did. Today, Target seems a bit overpriced with a PE ratio over 30, so I wouldn’t recommend buying it right now, but that’s certainly no reason to sell either (by my standards).

It’s not every day that you get to see a great deal on dividend growth stocks, but there are definitely deals that stand out from time to time. If you’re investing new capital each month, and do your research, you’ll be sure to catch some good ones.

How about you, are you grabbing these oil companies at their current discounted price?

Comments

Sir…
Nice article. Buying oil companies today may produce a bumpy road in the short term but long term you’ll be smiling at your investments. I’m doing the same. I wish you the best.
Respectfully,
Dennis McCain
dennismccain.weebly.com

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Kevin said:

Hi Dennis!

It takes time to develop the stomach for the short term bumpy roads. I have friends that have just started investing and see 3-4% price drops and look to me to keep them from freaking out. The strength to stay even-keeled is a kind of confidence that comes with experience. I remember when I first started and felt like ever stock I bought would start falling the instant I bought it.

I believe our patience will almost always be rewarded!

(edited for grammar)

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I have my eye on CVX which is closing in on a 4% yield ! I am already overweight in CVX though but it’s a great time to average down so I may buy more anyway. There’s some other cheap stocks out there as well IBM, BBL, GSK that I may buy first though as I think oil prices will continue to fall.

Still playing Diablo? I’m paragon 600+ now and looking forward to the next patch. :-)

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Kevin said:

Howdy Cap,

IBM is on my watch list, and I may need to consider that.

In Diablo news, my wife and I just got our hardcore seasonal characters to level 70. Hardcore makes every fight so much more intense. Congrats on Paragon 600!

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