Tuesday, April 16, 2013

Occidental Petroleum (OXY) 2013 Review


Occidental Petroleum produces and markets crude oil and natural gas, manufactures industrial chemicals, plastics and fertilizer and transports natural gas through pipelines. The company has grown profits at a 17% over the last ten years. Dividends grew at a lesser rate (12%) though they are expected to rise to a 14% pace. OXY’s return on equity has been in the 11-20% range. The company should continue to grow dividends and earnings as a result of:

(1) rising production from new properties,

(2) divesting non core assets,

(3) acquisitions,

            (4) improving profit margins,

            (5) stock buyback program.

Negatives:

(1) OXY earnings are very levered to the price of crude oil,

(2) political instability remains a major threat to earnings,

(3) highly competitive industry.

OXY is rated A++ by Value Line, has a 16% debt to equity ratio and its stock yields 3.3%.

  Statistical Summary

                 Stock      Dividend       Payout      # Increases  
                Yield      Growth Rate     Ratio       Since 2003

OXY           3.3%         14%             36%              10
Ind Ave       4.9             6                 21                 NA

                Debt/                        EPS Down       Net        Value Line
                Equity         ROE      Since 2003      Margin       Rating

OXY          16%          14%            2                25%           A++
Ind Ave      20             15              NA               7              NA

     Chart

            Note: OXY stock made good initial progress off its November 2008 low, quickly surpassing the downtrend off its May 2008 high (red line) and the November 2008 trading high (green line).  In mid 2012, OXY broke its long term uptrend, re-setting to a trading range (straight blue lines).  The wiggly blue line is on balance volume.  The Dividend Growth Portfolio owns a full position in OXY.  The upper boundary of its Buy Value Range is $74.  The lower boundary of its Sell Half Range is $170.



4/13

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