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Total: Higher Yield, Lower Valuation, and Growth Prospects

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May. 28 2019, Published 3:08 p.m. ET

Total’s dividend yield

Total’s (TOT) dividend yield of 5.4% is lower than Royal Dutch Shell’s (RDS.A) and BP’s (BP) yields of 6.0% and 5.9%, respectively. Total stock has fallen 12% in the past year and ~4% in the current quarter. The company has raised its dividend by 3% this year, in line with its targeted 10% rise between 2018 and 2020. Total has announced its first interim dividend, 0.66 euros per share, with an ex-dividend date of September 27.

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Total’s buybacks aim to offset dilution caused by its scrip dividend. The company plans to buy $1.5 billion in stock this year, assuming a Brent price of $60 per barrel, and aims to purchase up to $5 billion in stock between 2018 and 2020 to distribute the benefits of its higher earnings to shareholders. Total plans to cancel its scrip dividend option in June.

Valuation

Total’s forward PE multiple of 9.2x is below peers’ average of 12.4x. Its forward EV[1.enterprise value]-to-EBITDA multiple of 4.4x is also below peers’ average of 5.4x.

Whereas analysts expect TOT’s EPS to grow 7% year-over-year this year, they expect most peers’ earnings to fall. Total also has a comfortable debt position, with a total debt-to-total capital ratio of 33%. In comparison, the industry’s average ratio is 34%, and BP’s (BP) was 43% in Q1 2019.

Overall, Total seems well placed with a higher dividend yield, lower valuation, and good earnings growth prospects. Shell has similar metrics but an even higher dividend yield.

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