Investors who purchase oil stocks usually do so, at least in part, for their high dividend yields. Indeed, the biggest U.S. oil stocks, Exxon Mobil (XOM) and Chevron (CVX) both have dividend yields above 4%.
But investors can earn even higher dividend yields by looking outside the United States. For example, France-based Total SA (TOT) has a dividend yield above 5%.
Total is also growing production at a higher rate than many of its U.S.-based industry peers. Because of its growth potential and hefty yield, Total is one of the top high-dividend stocks for 2019.
Business Overview & Recent Events
Total is an integrated oil and gas company based in France. It is the fourth-largest integrated oil and gas company in the world. The company generates annual profits in excess of $10 billion, and the stock trades with a market capitalization above $150 billion. Total produces more than 2.5 million barrels of oil equivalents per day.
As a major oil and gas producer, Total’s primary growth catalyst is higher commodity prices. The worst years for Total have occurred when oil and gas prices declined, such as 2014-2016 when Total’s earnings-per-share declined by 55% due to falling commodity prices.
In late April (4/26/19) Total reported financial results for the 2019 first quarter. Adjusted earnings-per-share declined 6% for the quarter, to $1.02. The main culprit for Total’s declining profitability was lower oil prices, as Total had an average Brent crude price of $63 per barrel last quarter, down 6% year-over-year.
Fortunately, Brent crude is back up to $70 per barrel, which has boosted Total’s bottom line since the industry downturn of 2014-2016. However, oil prices have fallen back a bit in recent months. Still, the future remains bright for Total. Rising commodity prices would certainly lift the company’s earnings, but equally as important for Total’s bottom line is its impressive production growth.
Production in 2018 increased 8% from 2017 levels, reaching a record 2.8 million barrels per day. Project ramp-ups are expected to continue this year, leading to expectations of 9% production growth for 2019. Guidance for 9% production growth in 2019 is far ahead of its major U.S. competitors, Exxon Mobil and Chevron.
Total has numerous competitive advantages, primarily its size, and global presence. With its immense financial resources, Total spent more than $14 billion on organic investments last year to find and develop new projects that are critical to the company’s growth. This spending is paying off, as Total’s production growth leads its peer group.
Total: A High-Yield Income Stock
Total is a highly profitable company with strong cash flow, which allows it to return a lot of cash to shareholders. Total has an expected annual dividend payout of $3.10 per share for 2019, for a current dividend yield significantly above 5%.
By contrast, the S&P 500 Index yields just under 2% right now. As a result, Total is a highly attractive oil stock for income investors.
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