Before ExxonMobil and chevron formed they were standard oil. Which gave generous dividends.
XOM and CVX also give nice dividends. But ExxonMobil in the last 10 yrs ha sued 46 pct of operating cash flow to buy back stocks and onky 18 pct as dividends. CVS 20 pct as dividends.
In the period 95 to 2000 the numbers were 29 and 33 pct for dividends. So div have gone down. And buybacks gone up.
Since 1999 ExxonMobil has reduced shares outstanding by 40 pct thru buybacks.
Now both have cut BUYBACKS - XOM by 50% and CVS altogether. While their share prices are 11 pct lower than year ago.
Buy high, sell low. You may recall we had addressed this aspect of buybacks earlier in other threads. Glad the WSJ is coming around to address this.
July , 31 WSJ.
What are your thoughts?
Re: Stock buybacks
Today's WSJ had an interesting take on XOM vs CVX. ExxonMobil has reduced buybacks by 50 0ct but still on track to increase dividends. CVX needs oil to be at 70 in 2017 to cover dividends from cash flow. Else it will have to sell assets. It already sold 9 billion dollars of assets in last 12 months. Selling assets decreases output. And we have a round roti problem.
Since ExxonMobil does not have this problem, it can afford to pick these assets up at a bargain. And also go after Hess and someone I don't know anything abt - Pioneer Natural Resources.
Re: Stock buybacks
Remember the buy high sell low we talked abt re buybacks? With crude down. At circa 50, upstream business is suffering. While downstream business - refining - is going gangbusters due to low input prices.
The integrators such as ExxonMobil CVX she'll get abt 75 pct from upstream and 25 pct from downstream. So they have some cushion.
Pure downstream plays such a Valero Energy have been going gangbusters. Guess what? Valero may spend "more on buybacks than Exxon" per the article.
There is nothing new under the sun.
Except round roti.
Re: Stock buybacks
The article makes another great point. From 2002 to 2008 the total free cash flow minus dividends was 131 billion for xom CVX shell and bp. Net debt to capitalization decreased for 14 to 2 pct.
From 200 to 2014, total OCF was 60 billion higher. But FCF - dividends was onky 12 billion. WHILE NET DEBT TO CAPITALIZATION Soared to 14%! Over last 12 monts, FCF - dividends was a NEGATIVE 29 billion dollars.
Pretty ridiculous location of capital, don't you think?
Re: Stock buybacks
I remember the last crude plunge - if memory serves me right, it had stopped to 32 per barrel in 2002. That would hv lave been a great time to but oil stocks.
Crude rose to about 140 in a few years,.hovered above 110 for several years before the Oct 2014 plunge. If history is a guide, for long term investors, there could be opportunity.
Global slowdowns come and go. China has slowed. Europe has its problem. So demand for commodities including copper oil gold low. (Though gold is not something that is used in industry - so not sure if it's going down is related).
One thing that is different is the increasing penetration of renewables. US renewables has grown by leaps and bounds. I think wind is circa 50 GW. From abt 1 GW say 6 years ago. PV is also growing and getting cheaper. So cleaner way to power electric vehicles. So that wouod be competition to crude. So demand for crude wouod be under pressure.
So who knows how it will play out exactly. A value investor weighs all that and asks himself if the price is right.
The price definitely is much righter than 9 months ago. Time to start wading in. Those who were swimming naked have been exposed.
Re: Stock buybacks
Also, crude at 32 in 2002 is equivalent to about 45 in today's dollar assuming 2.5 pct inflation (back of Palm calculation).
With Brent at 50, that is pretty close.
Re: Stock buybacks
By the same token, due to slowdown globally, industrial stocks such as caterpillar and deere have come down.
But looking at their charts, they are still up a lot from 2009 levels. 3x I think. These are classic cyclicals. And as readers wouod remember from our thread on cyclical stocks, you wait for their earnings to go negative for a quarter or two. With the associated deep dive in stock prices.
And then you jump in.
These stocks are not there. Not even close.
Re: Stock buybacks
A disclaimer
As always, gmthese are the opinions of a non professional. Everyone including Mr. Hunt should do their own homework.
Re: Stock buybacks
A disclaimer
As always, gmthese are the opinions of a non professional. Everyone including Mr. Hunt should do their own homework.
What homework? And what stocks? I have heard China, the leading partner in the equation, is leading gobal economy!
Re: Stock buybacks
What homework? And what stocks? I have heard China, the leading partner in the equation, is leading gobal economy!
Welcome to tbis side of town, chapter 2. It has been quite desolate around these parts.
What homework? Don't you have homework to do? I recall you were also supposed to help jeans with her ARC assignment.
What stocks? I like those that are down a lot. But still have good balance sheet. With turnaround in a year or two.
China has been slowing down, chapter 2. That is one of the reasons for crude to have taken a deep dive.
What is your opinion on buybacks?
Re: Stock buybacks
Buybacks?! Always do them in time, before reputation runs out on you!
Re: Stock buybacks
Buybacks?! Always do them in time, before reputation runs out on you!
May I respectfully disagree with you?
If a company is buying back it's stock when it's reputation is intact, it is paying a high price. Buy high.
But for some reason it gets negative press with a temporary hit to its reputation, that might bee a good time to buy back it's stock.
Of.course if it is a fraud comlany, it won't matter when it buys back it's stock.
Thought?
Thanks for visiting our neighborhood. We are both honored and obliged.
Re: Stock buybacks
The oil stocks got beaten up today. Time to wade in? Or Haddin in?
Re: Stock buybacks
The oil stocks got beaten up today. Time to wade in? Or Haddin in?
Had some Exxon from circa 2 years ago at abt 86. Today picked up some more at 77.27. The high was 105 in past 52 weeks.
Do I know if it is up from here? Of course not.
Will it be up 10 years from now. Most probably.
Reasons for pick up:
Crude down is when u want to start wading in
Stock is down 28 pct from high.
Bad news everywhere
3.6 pct yield.
Ok financial strength.
Next up - BP or TOT or RDS.A or CVX or COP. Will wait a week.
COP is pure upstream play. So will wait for crude to go down some more.
Re: Stock buybacks
AMAT is also down from 25 to 16.83.
Will be interested at 12.
Re: Stock buybacks
Fish numbers Southie, of AMAT. How do you juggle at 12?
Re: Stock buybacks
Fish numbers Southie, of AMAT. How do you juggle at 12?
Did you just chapter 2 me? Or did you Southie me?
For either way, I am befuddled.
Would you kindly take the time to explain to me what exactly you are asking?
Be kind. Be very kind.