To posit that, since the average dividend HAS been c.3.5%, the stock becomes "fairly priced" when it rises to a level such that, with the current dividend, it will yield 3.5% - is reasoning totally BACKWARDS! The stock price dropped sharply following the spinoff, based on analysts' estimates of the diminuation of earnings and cash flow once PSX's revenue & income was no longer part of the equation.
By your reasoning, it is just as likely that COP will REDUCE the dividend to conform to the historical 3.5% yield-to-stock-purchase-price ratio. Such a dividend reduction has been suggested by other posters on this board.
I don't see either scenario as likely; COP will likely NOT return to the pre-spinoff c $9 EPS that resulted in a c $80 share price; nor do I think it likely that COP will reduce its dividend, which action would be an absolute confidence destroyer.
More likely is that the current dividend will be maintained, resulting in a slightly higher payout % than obtained prior to the spinoff. COP can still afford the current dividend, since most of the excess income over dividend was burned/wasted in stock buybacks.
No, I didn't mean COP might reduce to 3.5% dividend . In fact I think I miss read the question as pertaining to the dividend, my bad. I agree that COP earnings will be somewhat diminished due to the spin off but at the same time natural gas is on it's way north. I have not put pen to paper to say how much but it won't take a large gas movement to cover the diminished earnings. This is opinion I know but it is educated opinion.
I don't believe gas prices can be held back for much longer. They have been down to long as it is. Given that reasoning, it is totally reasonable for share prices to ease back to the $70 - $75 range. I fully expect it to do so. JMHO.
Some here have expressed that oil was going down due to lowered demand, which in my opinion is incorrect, and don't expect it to go higher for a long time to come. I say nonsense.
That is why we have a market, not everyone sees it the same.
By the way, the stock price drop was to reflect the exact pay out, ie $17.01 plus the dividend of $0.66, not because of analysts diminuation of earnings estiments.
Thank you. I appreciate the alternative view, although I tend to think in the more positive terms....which could be a mistake but so be it as that is my normal mindset. Hopefully the upwards bound direction will be the path for COP!
That is totally reasonable, hence the reason I'm in this stock. At $75.00/ share PE would be 8.18 at current earnings of $9.16.
Question is, do you believe product prices are going to plunge ?
It's possible but if it happens it will be a very short term event, IMHO . . . . no one can really see into the future but fwiw to ya , if COP were to plunge deep enough I'd morgage my home in order to take full advantage.