Phillips 66 (PSX) valuation has come down quite a bit in, coinciding of course, withe the fall in the price of crude oil. This company is a cash flow generating machine that nearly prints money despite the volatility in the oil market. What makes it an even better company is that management very shareholder oriented; consistently raises dividends and buys back stock. See below for details on the purchase of PSX and BAYRY.
----- Phillips 66 (PSX) -----
Purchased: 6 shares x $84.70 = $508.20 (+$0 commission)
This purchase brings my total share count to 70 shares.
Dividend Income: This purchase adds $19.20 of income annually ($3.20 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)
Forward P/E ratio: 8.9 vs. S&P Forward P/E @ 15.09
Debt to Capital < 50%: Yes, 33%
Interest Coverage ratio of at least 3:1: Yes, 11.4
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+
Current dividend yield > 1.5x S&P yield: 3.78% vs. S&P's 2.17%
Payout Ratio < 60% (or < 85% for utilities): Yes, 35.9%
Dividend King or CCC classification: Challenger (6 years of dividend increases; founded in 2012)
Comments: I posted a similar graphic last week with regards to the shareholder buyback yield of CAH for the past year, which is very appealing as an owner of a company whose ability to remain a going concern is without question and whose current market value is believe to be trading below intrinsic value. I believe the current situation is the same for PSX and apparently management has thought this to be the case for much of the past year, despite having traded higher recently. A buyback yield of 8.62% is quite phenomenal and helps pave the way for even greater shareholder returns in the years to come. When combined with the current dividend yield, total shareholder return is 12.23% for the year.
Also, PSX just recently announced a $2.3B capex budget for 2019 and reiterated its long-term objective to reinvest 60% of cash flow into the business and return 40% to shareholders through dividends and buybacks.
Lastly, in the recent third quarter earnings release, the company stated “Over the last six years, we have repurchased or exchanged nearly 30 percent of our initial shares outstanding, contributing to record adjusted earnings per share this quarter. We continued our commitment to shareholder distributions, returning $775 million through dividends and share repurchases in the third quarter and $5.2 billion for the year. We believe strong shareholder distributions remain fundamental to disciplined capital allocation.”
It's all good and I can't get enough!
Company Profile: Phillips 66 engages in the processing, transportation, storage, and marketing of fuels and other related products. The company operates through the following segments: Midstream, Chemicals, Refining and Marketing & Specialties. The Midstream segment provides crude oil and refined products transportation, terminaling and processing services, as well as natural gas, natural gas liquids and liquefied petroleum gas transportation, storage, processing and marketing services. The Chemicals segment produces and markets petrochemicals and plastics on a worldwide basis. The Refining segment Refines crude oil and other feedstocks into petroleum products such as gasoline, distillates and aviation fuels. The Marketing and Specialties segment purchases for resale and markets refined petroleum products such as base oils and lubricants, as well as power generation operations. Phillips 66 was founded on April 30, 2012 and is headquartered in Houston, TX.
----- Bayer AG (BAYRY) -----
Purchased: 38 shares x $17.198 = $653.52 (+$0 commission)
Total share count in BAYRY now stand at 210 shares.
Dividend Income: This purchase adds $32.73 of income annually ($0.8614 annual dividend paid in Jun)
Dividend yield > 1.5x S&P yield: Yes, 5.0% vs. S&P's 2.17%
Forward P/E ratio: 9.2 vs. S&P Forward P/E @ 15.09
Comments: As I mentioned last week, I continue to build my share count in this equity position by the dozens and I don't see it letting up anytime soon. If you're interested in reading more about my recent BAYRY purchases, which include quotes from analysts and company management along with link to source material, search the blog using the ticker symbol or simply click on the BAYRY tag.
----- Phillips 66 (PSX) -----
Purchased: 6 shares x $84.70 = $508.20 (+$0 commission)
This purchase brings my total share count to 70 shares.
Dividend Income: This purchase adds $19.20 of income annually ($3.20 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)
Forward P/E ratio: 8.9 vs. S&P Forward P/E @ 15.09
Debt to Capital < 50%: Yes, 33%
Interest Coverage ratio of at least 3:1: Yes, 11.4
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+
Current dividend yield > 1.5x S&P yield: 3.78% vs. S&P's 2.17%
Payout Ratio < 60% (or < 85% for utilities): Yes, 35.9%
Dividend King or CCC classification: Challenger (6 years of dividend increases; founded in 2012)
Comments: I posted a similar graphic last week with regards to the shareholder buyback yield of CAH for the past year, which is very appealing as an owner of a company whose ability to remain a going concern is without question and whose current market value is believe to be trading below intrinsic value. I believe the current situation is the same for PSX and apparently management has thought this to be the case for much of the past year, despite having traded higher recently. A buyback yield of 8.62% is quite phenomenal and helps pave the way for even greater shareholder returns in the years to come. When combined with the current dividend yield, total shareholder return is 12.23% for the year.
Also, PSX just recently announced a $2.3B capex budget for 2019 and reiterated its long-term objective to reinvest 60% of cash flow into the business and return 40% to shareholders through dividends and buybacks.
Lastly, in the recent third quarter earnings release, the company stated “Over the last six years, we have repurchased or exchanged nearly 30 percent of our initial shares outstanding, contributing to record adjusted earnings per share this quarter. We continued our commitment to shareholder distributions, returning $775 million through dividends and share repurchases in the third quarter and $5.2 billion for the year. We believe strong shareholder distributions remain fundamental to disciplined capital allocation.”
It's all good and I can't get enough!
Company Profile: Phillips 66 engages in the processing, transportation, storage, and marketing of fuels and other related products. The company operates through the following segments: Midstream, Chemicals, Refining and Marketing & Specialties. The Midstream segment provides crude oil and refined products transportation, terminaling and processing services, as well as natural gas, natural gas liquids and liquefied petroleum gas transportation, storage, processing and marketing services. The Chemicals segment produces and markets petrochemicals and plastics on a worldwide basis. The Refining segment Refines crude oil and other feedstocks into petroleum products such as gasoline, distillates and aviation fuels. The Marketing and Specialties segment purchases for resale and markets refined petroleum products such as base oils and lubricants, as well as power generation operations. Phillips 66 was founded on April 30, 2012 and is headquartered in Houston, TX.
----- Bayer AG (BAYRY) -----
Purchased: 38 shares x $17.198 = $653.52 (+$0 commission)
Total share count in BAYRY now stand at 210 shares.
Dividend Income: This purchase adds $32.73 of income annually ($0.8614 annual dividend paid in Jun)
Dividend yield > 1.5x S&P yield: Yes, 5.0% vs. S&P's 2.17%
Forward P/E ratio: 9.2 vs. S&P Forward P/E @ 15.09
Comments: As I mentioned last week, I continue to build my share count in this equity position by the dozens and I don't see it letting up anytime soon. If you're interested in reading more about my recent BAYRY purchases, which include quotes from analysts and company management along with link to source material, search the blog using the ticker symbol or simply click on the BAYRY tag.
Very nice PIV! Market drop has presenting lots of nice yields in big name companies.
ReplyDeleteBest of Luck,
-K
Thanks! Yes, valuations at look much more attractive with this recent pullback and some of the yields are surprisingly high despite being well covered by earnings and free cash flow.
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