While there is a record inflow of capital to bond funds in recent market action, the smart investors will return to stocks, especially Big Oil. Currently, the average corporate bond fund yield is 3.11%. In contrast, the dividend yield for ConocoPhillips is 4.23%. Over the last five years, the dividend growth rate for ConocoPhillips is 8.65%. For the industry, the average dividend growth rate is 5.93%.
At that rate of growth, the dividend amount for ConocoPhillips doubles about every 8 years. ExxonMobil is a "Dividend Aristocrat" stock, which means it has raised its dividend annually for more than 25 consecutive years. Increasing the amount of the income payment is not a feature associated with bonds. That is why savvy income seekers should go with Big Oil equities for long term growth.
For patient investors, there is an opportunity to buy Big Oil stocks at a discount due to the recent fluctuations.
As an example, ExxonMobil, the biggest oil firm in the world, is down more than 9% for 2014. But it is up over 2% for the last week. When ExxonMobil is trading 9% lower, that means the dividend is 9% higher. Big Oil looks to be in for a bumpy ride in the short term, but over the long term the increasing demand for energy and the dividend income growth should deliver rewarding total returns.At the time of publication the author had no position in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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