GAI has been identified by AAII (American Assoc of Individual Investors) through their Piotroski stock screen (a low price-to-book value stock screen).
First off, thank you for taking the time on a Friday evening to share such a kind, useful and information filled response.
2nd, if you want to make the distinction that fully paying the dividend somehow doesn't include also funding the capital program planned for the next 3 years, then that's your business. But the Motley Fool author made the point that COP doesn't have the cash flow to pay capex and dividends and that led to this post questioning if COP can fully pay its dividend. Companies that cannot fully fund dividends either are betting that growth will eventually catch up and fully fund the dividend sometime in the future, otherwise they have to shrink or cut the dividend at some time in the future.
3rd, the Seeking Alpha article you reference doesn't directly address this question. They are high on COP because the dividend is high, has been increased the last 12 years and dividend payout ratio is under 50%. Dividend payout ratio's are great, but they don't address planned capital spending - and COP has stated they plan to invest $15B each year for the next 3. So the question goes unanswered, with a $15B/yr capital program, can COP fully fund its dividend payments?
I had hoped to have a discussion about facts / numbers that show Motley Fool is right or wrong about their opinion. We obviously have different expectations about this message board.
Motley Fool, Wed Jan 23, article titled "ConocoNoPhillips 66"
They said " The company is committed to giving shareholders 20% to 25% of cash flows. Cash flows currently don’t pay capex and dividends and they will continue to use divestitures to pay the dividend rather than cut it."
I read that COP does not have enough CFO (cash from operations) to fully pay the dividend, and thus are using part of the proceeds from asset sales to pay the dividend. Is that right?? If that's true, it sounds like a shrinking company and future dividend decrease...
Thought we were speaking of the future for COP, not the past for PSX. "looking at the 2-yr chart" - and it says a very large portion of that gain is from PSX after the spinoff from COP. That future growth potential is no longer available to current COP investors as it resides with a different company that COP hasn't owned for almost a year. I still believe that COP is a proxy for oil and gas prices, and its future gain/loss will largely track any increase/decrease in oil and gas prices. Hope this helps!
Very true - COP will make a pile of money. But will you make any money investing in COP at $60/sh? You'll collect a good dividend but me thinks limited potential for price growth due to stable to falling outlook for crude and NG prices.
The issue really isn't the difference between Presidents Obama and Chavez or the US and Venezuelan governments. Its that COP is exposed to large financial losses by the actions of the host governments of the countries they operate in. When the UK raised taxes a few years back, even within COP this was viewed as one of the largest nationalization of assets by a government since the windfall profits tax of the 70's. Because COP is retrenching largely to N America and Europe, they are more exposed to likely tax increases there, whereas before their political risk was spread out over more countries and more affected by possible nationalizations, war, etc.
So when Venezuela unilaterally increases taxes it's political risk, when the US and UK do it, its something else?
It is true that COP is selling assets and retrenching to N America. A big part of their forward strategy is chasing non-conventional oil and gas plays. Most unbiased parties are forecasting a gas glut for the next few years so you shouldn't expect to see growth in the value of their large gas assets. Oil prices are also falling. So I see them as a pure proxy on oil & gas prices, which are both falling.
As far as political risk, you should consider the current environment in the US to raise taxes.