Wednesday, April 18, 2012

Occidental Petroleum (OXY)

Occidental Petroleum (OXY) 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 24% over the last ten years. Dividends grew at a lesser rate (10%) though they are expected to rise to an 11% 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) the company’s expertise in enhanced oil recovery techniques,

(3) acquisitions,

(4) resumption of operations in Libya,

(5) improving profit margins,

(6) stock buyback program.


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

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

OXY is rated A++ by Value Line, has a 14% debt to equity ratio and its stock yields 2.1%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
OXY 2.1% 11% 26% 10
IND 3.7 5 31 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
OXY 14% 16% 1 26% A++
IND 14 17 NA 7 NA


Note: OXY stock made great progress off its March 2009 low, quickly surpassing the downtrend off its May 2008 high (red line) and the November 2008 trading high (green line). The stock is in a long term uptrend (straight blue lines). However, it is in an intermediate term trading range (the purple line is the upper boundary; it has yet to clearly set a lower boundary). The wiggly blue line is on balance volume. The Dividend Growth Portfolio currently owns a one half position. OXY is on the Dividend Growth Buy List. The lower boundary of its Sell Half Range is $147.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.