TSI’s Scott Clayton has identified six oil and gas companies excelling in stability, diversification, and dividend sustainability.
Our proprietary Dividend Sustainability Rating System evaluates firms based on strong fundamentals, consistent cash flow, and exceptional yield potential. These metrics ensure these companies are well-positioned to thrive despite market fluctuations.
Our analysis highlights leaders across the integrated oil and gas sector. These companies represent excellent opportunities for investors seeking income and growth through exposure to the entire energy value chain. Their ability to balance upstream and downstream operations mitigates risks from market volatility while delivering consistent returns.
Excerpt from theglobeandmail.com.
What are we looking for?
Sustainable dividends from integrated oil and gas leaders – their shares all the more attractive for new buying given falling oil prices.
The screen
Oil prices have plunged lately in the wake of global tariff battles and fears of an economic slowdown.
Unlike pure producers, integrated oils have both upstream (production) and downstream (refining and petrochemicals) operations. The diversity of their operations cuts the risk of oil price volatility. That’s because their upstream businesses gain with higher oil prices, while their downstream operations gain when prices for oil drop.
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The phenomenon lends stability in periods of falling prices – and cuts their overall risk! It also helps them to keep paying high, sustainable dividends, even if their share prices remain depressed.
Our search started with global integrated oil stocks. From there, we singled out those dividend payers with strong production and cash flow forecasts, before applying our TSI Dividend Sustainability Rating System, which awards points based on key factors:
• One point for five years of continuous dividend payments – two points for more than five
• Two points if it has raised the payment in the past five years
• One point for management’s commitment to dividends
• One point for operating in non-cyclical industries
• One point for limited exposure to foreign currency rates and freedom from political interference
• Two points for a strong balance sheet, including manageable debt and adequate cash
• Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments
• One point for an industry leader
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
These Six Canadian Oil & Gas Stocks Scored the Best for Income and Stability
Our TSI Dividend Sustainability Rating System generated six stocks:
Canadian oil and gas majors Imperial Oil Ltd. (with a 3.2% yield) and rival Suncor Energy Inc. (4.7%), both headquartered in Calgary, generate production from oil sands, as well as conventional wells, for sale and to feed their refining operations.
California-based Chevron Corp. (4.7%) and Texas-based Exxon Mobil Corp. (3.7%) both continue to use strong cash flow from both their upstream and downstream operations to increase shareholder dividends, as well as share buybacks.
Finally, BP PLC (7.3%) and Shell PLC (4.7%), both headquartered in London, England, remain two of the world’s biggest integrated oil and gas producers.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
