One of the best ways to derive income from your portfolio is by buying dividend-paying stocks. These stocks actually pay money to the people who own them instead of forcing their investors to rely on capital gains and selling off their assets to get money out of the stocks that they own. In addition, dividend-paying stocks offer a few advantages over bonds, which investors normally consider the income vehicle of choice.
First, dividend-paying stocks offer growth prospects that bonds do not. The only way to get capital gains out of bonds is to rely on interest rate declines because bond prices move inversely to interest rates. Second, in today's low interest rate environment many dividend-paying stocks offer much higher yields than do bonds. All of the stocks that this article will discuss fit into this category.
Finally, companies tend to increase the dividends they pay out whereas the interest rate payments on bonds remain stable. Thus, these stocks can do a much better job of helping you stay ahead of inflation. This article will discuss high-yielding European oil companies that could be good investments for the income-producing portion of your portfolio.
Statoil ASA (NYSE: STO ) is a large, multinational oil company headquartered in Norway. The company originally focused on developing the rich oil and gas deposits in the North Sea and on the Norwegian Continental Shelf, but it has since expanded to areas outside of Norway which include Brazil, Tanzania, West Africa, and North America. Today, more than 35% of its total oil and gas production comes from these areas.
Statoil formerly paid out its dividend once a year, but this year it has begun to pay out its dividend on a quarterly basis. This brings it in-line with many other oil companies as well as dividend-paying companies outside of the oil and gas sector. At the time of writing, shares of Statoil offer a dividend yield of 4.2%.
One of the biggest opportunities for Statoil lies in unconventional oil and gas production plays such as the Bakken shale. Statoil first entered the Bakken in 2011 by purchasing Brigham Exploration, at the time one of the largest operators in the region. This acquisition gave Statoil control over Brigham's acreage in the play of roughly 330,000 net acres.
Statoil also acquired a significant amount of infrastructure as a result of this deal which included three operating oil facilities, seven operating saltwater disposal facilities, approximately seven hundred miles of pipeline, and ten unit trains. This infrastructure should assist Statoil in bringing the oil that it extracts from the Bakken to market in a cost-effective way which will allow the company to maximize its profits from the region.
Statoil has long had the ambition of increasing its production level to 2,500 mboe per day from its current level of 1,940 mboe per day by 2020. Although the company has stopped speaking of this goal in the aggressive language that it previously used, Statoil will likely grow its production going forward, and this should result in profitability growth assuming that oil prices do not fall by enough to cancel out the cash flow increase from this new production. Statoil will likely raise its dividend going forward as this growth story plays out.
Total S.A. (NYSE: TOT ) is one of the largest oil and gas companies in the world. Total is headquartered in Paris, France but it has operations all over the world, including Brazil, Kazakhstan, the Middle East, and North America. The company also boasts one of the highest dividend yields out of any of the major oil companies, as it yielded 5.05% at the time of writing.
Total is bringing some new fields online this year and ramping up the production at others which should result in the company achieving higher production this year than it did last year. The company should see a production increase of approximately 4% this year.
As with Statoil, the start-up of these new fields should prove to be accretive to Total's cash flow. Total itself stated that it expects to grow its average daily production by 150,000 barrels this year and it expects this to increase its cash flow by $50 per day per barrel of oil. This cash flow growth could give the company room to increase its dividend going forward.
Eni (NYSE: E ) is an Italian multinational oil and gas company headquartered in Rome which has large operations in Mozambique, Libya, and the North Sea, among other places. Like the other companies here Eni pays out a large dividend, as it yields 6.07% at the time of writing.
One of Eni's biggest opportunities going forward is becoming a major supplier of liquefied natural gas to the resource-hungry markets of Asia. Eni will do this by developing the massive Mamba gas field, a massive natural gas field located off of the coast of Mozambique which contains approximately 90 trillion cubic feet of natural gas according to estimates.
The Energy Information Agency expects the demand for natural gas in Asia to surge in the coming decades, with the region's OECD-member nations increasing their demand by an average of 1.3% annually and the region's non-OECD member states growing their demand by an average of 3.3% per year. This massive field has the perfect positioning for the company to ship natural gas to these markets and take advantage of this growth.
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