Bill Miller seems befuddled. In his July 2010 commentary, he wonders why investors keep purchasing 10-year Treasuries yielding about 3%, when companies like ExxonMobil offer much higher potential returns.

His formula for Exxon is straightforward: "A sum of the dividend yield, growth rate and share shrink could represent an attractive annual return even if the valuation stays the same, and the valuation is among the lowest the company has traded at in years." When you add up the components, Exxon could offer 18% returns per year in a low-return environment.

I'm no less baffled than Miller by investors' preference for bonds, but I do think he's on to something. To see whether more Miller-like opportunities like Exxon were out there, I looked for companies with:

  • A dividend yield greater than the 3% 10-year Treasury yield.
  • A five-year track record of dividend growth.
  • A history of repurchasing shares.
  • A price-to-earnings ratio less than 25.

Here's what I found:



5-Year Dividend Growth

Share Shrink


ConocoPhillips (NYSE: COP)





Occidental Petroleum (NYSE: OXY)





Anadarko Petroleum (NYSE: APC)





From the table above, ConocoPhillips fits Miller's criteria perfectly. It pays a 3.9% dividend that has been growing 14.5%, on average, for the past five years. The company also trades at just over nine times earnings and produces plenty of cash flow to repurchase shares. Occidental Petroleum and Anadarko are both fine companies, but for this exercise, their dividend yields are too low.

Foolish bottom line
Would Bill Miller consider investing in ConocoPhillips? It meets all the criteria above, and it could offer an 18.4% return over time -- although it may be hard for the company to maintain such a dividend growth rate. In today's low-return environment, that's pretty attractive. I don't know why the market is offering up this opportunity, but as long as it is, ConocoPhillips could be worth pursuing further.

Million Dollar Portfolio associate advisor David Meier does not own shares of any of the companies mentioned. The Fool's disclosure policy never goes out of style.