After stalling briefly at $80 a barrel, Crude oil is now moving steadily higher, currently trading between $85-$86. Consequently, oil shares have seen a price rise as well. But if you're seeking the best of the best in the oil patch, it is perhaps still better to look overseas. Foreign oil companies with ADRs trading stateside could now be the safest way to play the rise in crude.
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Reasons for Going Abroad
Why invest in overseas oil companies? First, the group offers a superior yield, upon which we'll expand below. Second, oil companies, whether American, Italian, Spanish or Chinese, earn their revenues in dollars. That means no worries about currency conversion or any need to hedge your investment. Below are three of the best positioned global integrated oil companies, complete with key fundamentals.
Cost Cutting Brings Big Gains
British Petroleum plc (NYSE:BP) is one of the oldest and biggest of the oil majors, and its performance in the last couple of months has been rewarding to investors. Since the first week of January BP shares have climbed nearly 5%. Better yet, they have momentum indicators on their side. The stock is trading with a one year trailing P/E of just 11.55.
Over the last year BP has allowed investors to realize capital gains of 55%, with much of the recent rise attributable to blockbuster 4th quarter earnings that were $7.64 billion dollars stronger than the prior year's quarter. Higher crude prices and internal cost cutting measures in the last year were largely responsible for the gain. Furthermore, BP says it plans to continue strengthening and reorganizing it operations in the quarters ahead, particularly in Germany. Germany is where it does its biggest business on the European continent.
Royal Dutch Shell plc (NYSE:RDS.A, RDS.B), headquartered in The Hague, Netherlands, is up 44% in the last twelve months. That compares favorably with the ishares S&P Global Energy Sector ETF (NYSE:IXC), which rose only 34% in the same time frame. Royal Dutch Shell pays investors a handsome 5.44% annual dividend and trades with a P/E of 15.13.
Total S.A. (NYSE:TOT) is France's largest integrated oil company, with a market cap of $139 billion. In the last year, the company's shares rose by better than 23%, a little more than half the return garnered by the SPDR S&P 500 ETF (NYSE:SPY). The shares currently yield 5.2% per annum and trade at a multiple of 11.59 times last year's earnings.
Big oil is now paying big dividends - so long as you go offshore to buy it. Simply put, oil ADRs are outrunning the local competition and, in a number of cases, the broad market as well. (Looking to add dividends to your portfolio? Check out America's Top Dividend-Paying Stocks.)
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