Why Chesapeake’s stock performance reflects caution from investors

Market Realist

A key overview of Chesapeake and its second quarter 2014 earnings (Part 7 of 8)

(Continued from Part 6)

CHK versus XLE and SPY

On June 16, Chesapeake declared a quarterly dividend of $0.0875 per share, which amounted to $0.35 annualized. The dividend represented an annual yield of 1.30%. Year-to-date, the stock is up 5.15%.

The Energy Select SPDR ETF (XLE) is an ETF that targets the energy sector. It has an annualized dividend of $1.68. This represents a yield of 1.72%. The year-to-date stock return for XLE is 10.21%.

The SPDR S&P 500 (SPY), in comparison, has a yield of 1.79%. It has an annualized dividend of $3.58. Year-to-date returns for SPY are 9.40%.

The energy industry outperforms the broader market

As we noted above, XLE has had relatively high year-to-date returns compared to SPY. This is because energy stocks have been rising faster than the broad market, thanks to geopolitical issues like crises in Ukraine and the Middle East that have kept oil prices elevated.

Oil prices rise amid geopolitical uncertainties due to investor speculation over disruptions to oil supplies.

CHK is volatile compared to XLE

You can also note from the graph above that CHK’s performance relative to XLE has been erratic. This is likely due to its high debt levels and its efforts to bring down debt via various strategies, including asset divestitures, well cost reduction, and increased liquids focus.

In comparison, companies like ConocoPhillips (COP) and Cabot Oil and Gas (COG) have outperformed the energy sector ETF. Read our Market Realist series Must-know: Key takeaways from ConocoPhillips’ Q2 earnings to see why COP outperformed XLE.

Peer valuation

The following part of this series draws a comparison between CHK and its key peers.

Continue to Part 8

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