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The recent market turmoil has created some tremendous opportunities for income investors looking to buy shares of oil and gas companies.
I ran a screen for mega cap oil stocks – oil stocks with a market capitalization greater than $100 billion – paying a 5% dividend or greater. Sure enough, there are four mega cap oil stocks paying dividends large enough to meet this criteria.
With oil trading at levels not seen since 2010, many oil and gas stocks have been hit hard, creating bargains among even the largest and most stable of oil stocks.
Let’s take a look at the four mega cap oil stocks paying greater than 5% dividend yields:
High-Yield Oil Stock No. 1: BP (NYSE: BP)
Oil giant BP is the smallest of the four companies on this list, with a market capitalization of around $128 billion.
BP continues to live under the shadow of its massive oil spill in the Gulf of Mexico that took place in mid-2010, at least in the court of public opinion. The stock is down 13.35% so far in 2014 and more than 20% since its July highs, bringing its dividend yield up to 5.5%.
The stock looks cheap, too. It trades at a price-to-earnings ratio (PE) of 13.04, and a price-to-next-year’s-earnings ratio (Forward PE) of 5.39. That is much lower than the S&P 500’s PE of 18.43 and a Forward PE of 16.25, according to the Wall Street Journal.
High-Yield Oil Stock No. 2: PetroChina Company (NYSE: PTR)
State-owned PetroChina is big, with a market capitalization of just under $227 billion.
PetroChina is also the only stock on this list that is actually positive for the year, up 12.6% so far in 2014. Still, the stock is down more than 17% since its highs in early September, bringing its dividend yield to 6.38%.
Shares of PetroChina appear to be pretty cheap but, with a PE of 10.51 and Forward PE of 9.59, they certainly aren’t the cheapest on this list.
High-Yield Oil Stock No. 3: Royal Dutch Shell (NYSE: RDS.A)
Royal Dutch Shell, best known for its “Shell” brand, is the biggest company on this list, with a $229 billion market capitalization.
The stock is essentially flat for the year but is down around 15% since early July, bringing Shell’s dividend yield up to 5.31%. Shares trade at a PE of 13.65 and Forward PE of 7.26.
High-Yield Oil Stock No. 4: Total (NYSE: TOT)
French oil giant Total boasts the highest dividend yield on this list, with a whopping 7.04% payout. The stock is down 7% for the year and just shy of 20% since the end of July ,though the stock itself seems unaffected by the sudden and tragic death of Total’s CEO in a plane crash earlier this month.
Total is also cheap, trading at a PE of 10.22 and a Forward PE of 9.3.
The Bottom Line
The common theme here is that all four of these oil stocks appear cheap based on their PE and Forward PE ratios.
The recent market turmoil and falling price of oil has created serious bargains among even the largest of the world’s oil and gas companies. These four certainly aren’t the only bargains among oil stocks today but, with mega cap stability and greater than 5% dividend yields, now looks like a great time for income investors to pick up shares of these companies.
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