Friday, 20 December 2013

A Look at Occidental Petroleum Corp


Below is my analysis of OXY (Occidental Petroleum Corp), which is an international oil and gas exploration and production company, and has a subsidiary, OxyChem, a major North American chemical manufacturer.

Average Dividend Yield Analysis*

OXY:US
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2003
$21.49
$13.59
$0.125
$0.13
$0.13
$0.13
$0.52
3.79%
2.40%
2004
$30.38
$20.98
$0.13
$0.1375
$0.1375
$0.1375
$0.54
2.59%
1.79%
2005
$44.90
$27.09
$0.1375
$0.155
$0.155
$0.155
$0.60
2.22%
1.34%
2006
$55.45
$40.95
$0.18
$0.18
$0.18
$0.22
$0.76
1.86%
1.37%
2007
$79.25
$42.06
$0.22
$0.22
$0.22
$0.25
$0.91
2.16%
1.15%
2008
$100.04
$39.93
$0.25
$0.25
$0.32
$0.32
$1.14
2.85%
1.14%
2009
$85.20
$47.50
$0.32
$0.32
$0.33
$0.33
$1.30
2.74%
1.53%
2010
$99.57
$72.13
$0.33
$0.33
$0.38
$0.38
$1.42
1.97%
1.43%
2011
$117.89
$66.36
$0.38
$0.46
$0.46
$0.46
$1.76
2.65%
1.49%
2012
$106.68
$72.43
$0.46
$0.54
$0.54
$0.54
$2.08
2.87%
1.95%
2013


$0.54
$0.64
$0.64
$0.64
$2.46


2014


$0.64
$0.64
$0.64
$0.64
$2.56



10y ave
2.57%
1.56%

5y ave
2.62%
1.51%







3y ave
2.50%
1.62%







5y
$97.83
$169.89







3y
$102.50
$157.74






Super Cheap
$67.55



The current yield on OXY shares of 2.75% ($2.56 / $93.09) is higher than the 3 and 5 year average dividend yields of 2.50% and 2.62%, respectively.

Buying the stock at its low in 2003 would have earned you an initial yield of 3.79%. Using the current annual dividend, that corresponds to a stock price of $67.55 today (see “super cheap” price in the table above).

Graham Price

OXY’s 2010, 2011 and 2012 EPS were $5.61, $8.16 and $5.71. 3Y Ave EPS = $6.49.
OXY’s BV is $53.08.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $88.06

Cyclically Adjusted Price to Earnings Ratio

OXY’s 10Y Ave EPS = $5.44
CAPE = Stock Price / 10Y Ave EPS = $93.09 / $5.44 = 17.5
A CAPE below 20 is good.

Conclusion

OXY increased EPS from $2.06 in 2003 to $5.71 in 2013. That’s an increase of 2.77 times over 10 years. Not stellar, but not bad either. 2013 and 2014 EPS are estimated at $7.17 and $7.60, respectively.

Although the stock price is above the Graham price, it is selling at a discount relative CAPE as well as the 3 and 5 year average dividend yields.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.

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