NEW YORK (The Street) -- The price of oil has recovered to around $60 a barrel since hitting lows under $50 in mid March. The recovery in oil prices is a positive sign for oil stocks. Simply put, the higher the price of oil, the more money these 3 oil stocks below make.
Despite oil prices rising in the last 2 months, these 3 oil stocks are all still significantly undervalued. Each has a dividend yield above 3% - providing current income for investors. The combination of a high dividend yield and an undervalued stock means investors get "paid to wait" for the company's stock price to rise.
These 3 high-yield oil stocks have had more than 25 years of dividend payments without a reduction.
ExxonMobil (XOM) is the largest oil corporation in the world. The company has a market cap of $365 billion. ExxonMobil's market cap makes it the 4th-largest publicly traded corporation in the United States.
The stock price has declined by more than 10% in the last 12 months and is currently trading for a price-to-earnings ratio of just 13.1. The company appears to be significantly undervalued at this time. ExxonMobil's current dividend yield of 3.3% is near the highest level it has been since the 1990's. Simply put, now is one of the best times to buy ExxonMobil stock in the past 25 years.
ExxonMobil is more than just a value stock. The company is among the highest-quality "blue chip" publicly-traded dividend stocks. ExxonMobil is a Dividend Aristocrat thanks to its 32 consecutive years of dividend increases. The company's ability to steadily raise dividends despite fluctuating oil prices shows it has excellent earnings power.
One of the largest and most profitable companies in the world, ExxonMobil very clearly has a competitive advantage. It generates more than 80% of its profits from its upstream drilling and exploration business. ExxonMobil's industry-leading size and excellent connections around the world give it global access to profitable exploration opportunities.
In the short-run, the company's profits are dependent on the price of oil. When oil prices hit lows near $30 a barrel in 2009, ExxonMobil still made over $19 billion in profits on the year. Generating $19 billion of profits in one year would be considered a huge success for all but a few businesses. Low oil prices reduce earnings, but ExxonMobil still generates significant earnings even during periods of low oil prices.
The company's long-term growth potential is dependent upon rising energy demand. The growing middle class in developing economies like China and India is causing global energy demand to increase. This trend will benefit ExxonMobil as it continues to supply oil for the world.