Integrated energy stocks and their dividend yields
In this series, we’ll be looking at eight integrated energy stocks and ranking them on their dividend yields. Royal Dutch Shell (RDS.A) occupies the top spot. It’s followed by BP (BP) and Eni SpA (E). The company that has the lowest dividend yield is Suncor Energy (SU).
What valuations and dividend yields reveal
Valuations of integrated energy stocks have risen because their stocks have risen. The average forward PE multiple for these stocks is 13.4x.
Usually, investors look for undervalued stocks with high dividend yields. Shell, BP, Total (TOT), and Equinor (EQNR) are trading below the average forward PE multiple, while the remaining stocks are above that multiple. Of the four stocks with below-average valuations, Shell seems to be attractively placed with the highest dividend yield and lowest valuations. BP, the second-highest dividend yielder with below-average valuations, seems attractively placed.
Shell’s and BP’s dividends have remained steady in the past three years, while ExxonMobil (XOM), Chevron (CVX), Total (TOT), Equinor (EQNR), and Suncor Energy (SU) have seen increasing dividends. The markets are likely factoring that into their valuations. BP’s debt position is weaker since its total-debt-to-total-capital ratio is above the peer average. However, its net debt-to-EBITDA ratio declined year-over-year in the first quarter.
TOT and EQNR have below-average valuations but lower dividend yields. EQNR’s total debt-to-capital ratio is above the peer average. Eni (E) has a higher yield but looks expensive in terms of PE ratio, while ExxonMobil (XOM), Chevron (CVX), and Suncor Energy (SU) have higher valuations and lower yields.
These variations could be due to valuations factoring in various parameters such as financial (debt, cash flow, earnings growth, margins), competitiveness (market positioning, competitive edge), and industry (refining conditions such as cracks and spreads) factors.
In the rest of this series, we’ll look at individual companies’ dividend yield trends, starting with Shell.