Total SA: Long Reserve Life Offers Dividend Safety

Total offers one of the highest dividend yields out of all the oil majors. This dividend is made secure by the company's substantial reserves, which ensure that it will be able to maintain its current production even if it has one bad year in discovering oil.

Mar 4, 2014 at 12:25PM

French oil giant Total S.A. (NYSE:TOT) has long offered one of the best dividend opportunities out of all of the so-called oil "supermajors," which were originally the six largest oil companies in the Western world. Although today there are many other oil companies that are similar in size and scope to the oil supermajors, these companies are still some of the most powerful companies in the energy industry. Total boasts the highest dividend yield of this group, which also includes such companies as ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX). It also has some of the largest reserves relative to its production, which should help ensure the safety of the dividend.

Fourth quarter highlights
Total announced its fourth-quarter and full-year 2013 results on February 12. Many of the company's key numbers showed slight declines on a year-over-year basis, but this can be largely accounted for by lower oil prices and weakness in the European refining industry rather than by any problems with the company's operations. Here are the highlights from the company's fourth-quarter and full-year results:

  • Total sales of 47.753 billion euro in the fourth quarter, a slight decrease from the company's fourth quarter 2012 total sales of 49.868 billion euro.
  • Adjusted net operating income of 2.797 billion euro in the fourth quarter compared to 3.320 billion euro in the fourth quarter of 2012.
  • Adjusted net income of 2.467 billion euro in the fourth quarter of 2013 compared to 3.041 billion euro in the fourth quarter of 2012.
  • Net income of 1.605 billion euro in the fourth quarter of 2013 compared to 2.341 billion euro in the fourth quarter of 2012.
  • Increased trailing dividend to 2.38 euro per share, which represents a 3.4% increase for the remaining dividend of 2013.

Despite the somewhat lower net income, Total's cash flow from operations increased on a year-over-year basis to 9.656 billion euro in the fourth quarter, which will help improve the company's ability to afford this higher dividend. However, Total is certainly not in financial trouble, nor is it struggling to pay its dividend.

Large and secure reserves
In a previous article, I discussed the importance of an oil company's reserves in the continuation of its operations. An oil and gas company needs to either discover or purchase new sources of oil and gas to replace the reserves it extracts and sells if it wishes to continue its operations on a long-term basis. 

Total did not neglect this aspect of its business in 2013. At the end of 2013, Total's reserves were 11.526 billion barrels of oil equivalent, an increase of 1% over its reserve level at the end of 2012. This means that Total managed to replace every barrel of oil equivalent that it extracted from the ground in 2013 and then some.


Source: Total

The chart above breaks down Total's reserve development into both oil and gas. This is necessary because Total produces both compounds. Unfortunately, the company's 2013 reserve development was heavily weighted toward natural gas. Total did not actually find or acquire enough oil to replace what it removed from the ground. This could certainly be a problem if it continues. However, Total has begun to take steps to ensure that the decline of its oil reserves in 2013 will not become a problem.

Acquisition of productive stake in large fields
In the fourth quarter, Total was awarded a 20% stake in the gigantic Libra field off of the coast of Brazil. This field is estimated to contain eight to twelve billion barrels of recoverable oil resources. Total's push to get this stake shows its desire to maintain its oil reserves at a level sufficient to maintain its current production levels going forward and even grow this production level. The Libra field could eventually become one of the world's largest oil production centers, possessing estimated peak production potential of 1.4 million barrels per day. With its stake in the field, Total will proportionally benefit as this field is brought online.

Long reserve life
Total still has plenty of reserves to maintain its current production while it works to increase its oil reserves. At the end of 2013, Total had a proved reserve life of more than thirteen years. This means that the company can continue to produce for more than thirteen years at its current rate just by using its proved reserves. This gives the company one of the longest reserve lives among all of the oil supermajors.

High dividend yield
Total pays its dividend quarterly like its American peers. However, because Total declares and pays its dividend in euro, its dividend fluctuates with the exchange rate from the perspective of U.S.-based investors. As mentioned earlier, Total just recently increased its dividend to 2.38 euro per share. However, this is the trailing dividend rate, taking the company's Q1-Q3 2013 dividends into account.

The dividend going forward will be 2.44 euro per share or 0.61 euro per quarter per share. This is the dividend that an investor buying the stock today will receive. The stock trades for 46.22 euro on the stock exchange in Paris so this gives the stock a 5.3% yield on its native exchange. The ADR should have a similar yield as it trades at approximately the same price converted to dollars. This dividend is subject to the French withholding tax of 15% for U.S. residents and so the best place to put an investment in Total is in a regular, taxable account.

What does Buffett see in this energy heavyweight?
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!


Daniel Gibbs has no position in any stocks mentioned. His research firm, Powerhedge LLC, has a business relationship with a registered investment advisor whose clients may have positions in any stocks mentioned. Powerhedge LLC has no position in any stocks mentioned and is not a registered investment advisor. The Motley Fool recommends Chevron and Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers