Volatile market produces a dividend winner
This Italian oil company saw a slight drop Monday that created a perfect entry price.
Way back on March 12, I promised that I was going to add a stock to my dividend income portfolio soon (on March 13, I said). Well, I didn't make the add then and I've been waiting for the predictable volatility of this market to give me a better entry price. I got that price Monday and I'm finally making my add to that portfolio.
I'm going to take advantage of Monday's 1.6% drop to recommend buying shares of Italian oil company Eni (E). It's not surprising that shares of Eni were down Monday -- the Milan exchange FTSE MIB index closed down 2.5% today in reaction to the Cyprus "solution."
But Monday's drop brings the total decline since the Jan. 17, 2013 high to 10.9% and it pushes the dividend yield close to my 5% dividend income buying target. (The yield was 4.95% on March 25 based on the paid September 2012 dividend and the declared May 20, 2013 dividend.)
And I think you might even get some growth out of this oil stock. The company is the largest producer of oil and gas in Africa of any of the international oil companies. And with Africa showing some of the most interesting new finds in the world -- like the huge Area 4 natural gas discovery (an estimated 75 trillion cubic feet of natural gas) in Mozambique, Eni has a very attractive growth path. (Eni has agreed with Anadarko, another big player in natural gas in Mozambique, to build a plant to liquefy and export natural gas. That's likely to prove a very expensive venture because almost all infrastructure for the plant will have t be built from scratch in Mozambique.)
What's reassuring to dividend investors about Eni is that much of its forecast of increased production -- 600,000 barrels a day by 2016 -- will come in the 2013 to 2014 period. In fact, 75% of new production forecast by 2016 will come in 2013 and 2014. (For example, the giant Kashagan field in the Caspian Sea is expected to start production in June 2013. The field is thought to be the largest discovered in the last 30 years.) That will help diversify the company's production and lower Eni's risk from its production in volatile countries such as Libya. And it should give the company plenty of cash flow to cover dividends and share buybacks even after capital spending.
Eni doesn't always get the most out of its assets. The Italian government's 30% stake means that Eni is, for what amounts to political reasons, engaged in businesses such as chemicals and electricity production that don't have very attractive returns. To me that says I wouldn't want to make this a long-term holding while I waited for growth to compound. But at the right moment and at the right price, this is solid dividend play with some price upside for a two- or three-year period.
I have lived in Italy for many years. I even completed my internship in an ENI refinery. The company is corrupted by unions, bad management, bribes and political intrigue. Italy unfortunately is a bankrupt country and I wouldn't touch any investments there. Any investor that is interested in the Euro zone can buy the oil giant Total which has a 6% dividend and operates in a more stable country like France. With all due respect to Mr. Jubak who I read and with great respect for his stock market knowledge I think that an American investor who is not acquainted with the Italian economic environment should stay away.
I like dividend stocks, but I don't buy them only for the dividend. To me you need dividend stocks to ahve gorwing dividends and a growth story for earnings in geneal. Without a growth catalyst, to a degree the dividend is at risk. I think everyone has seen an electric utility stock with a 75% payout and very little EPS growth cut their dividend in half on a hicup in earnings. With growth comes security.
So go look again for a dividend payer with growth. I realize the author said eni was not a long term holding, but I then ask why bother, move on to a grower with a dividend.
Hmmm, this stock was going to be a winner....... 5 years ago ..........and then it
tanked from the 80's to the 40's.
Dividend looked great, but I loss some bucks on this one back in 2009.
Glad I sold. Lesson learned for me. It was widely recommended by the usual
suspects. Be careful out there.
"The return OF your principal is more important than the return ON your principal."
Jim, Jim, Jim....
Still giving out the poor advice, just like in 2008, 2009, 2010
Look back at your VLO recommendation before it went from 80 to 25. But a good dividend.
This guy has no credibility.
I would think there might be a better Oil patch pick then Italy..?? In the Foreign arena..
One of our Oil plays is Statoil (STO) for a foreign position, pays about 4%, and very stable Company, at least as far as I know yet...Does not have much growth...But they are in aquiring and deal making modes.
And I still have to question the idea of investments, in somewhat unstable Italia..
If you follow Jims, Anthonys, or Bill Fleckinsteins advice here in MSN money, you are destined to lose a lot of money.
Here is my comment:
NOT ONE OF THE PREVIOUS 16 COMMENTS WERE POSITIVE ON THE BUYING ENI NOR WERE ANY OF THE COMMENTS POSITIVE ON MSN.
Probably because it is generally bad advise.
First pay off your toys. Try to stay debtfree.It is difficult to be debtfree,but go one item by item.
It is better then paying interest to anybody Nobody is paying interest to savers and there are
no investment return or gains.
Copyright © 2014 Microsoft. All rights reserved.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.