Oil Stock To Watch Despite Falling Oil Prices


The price of crude oil has been getting slashed recently. When comparing the oil market to the stock market, the oil market’s performance is clearly worse. Crude oil has fallen nearly 35% from its highs that we saw in October. The price of crude oil has taken its toll on oil stocks, with companies like Exxon Mobile experiencing significant selloffs.

Declines in crude oil prices impact some stocks more than others, so not all oil stocks should be labelled as sell’s. There are many oil stocks that have low valuations due to the market conditions, but deliver high dividends and have a strong balance sheet.

Top Picks For Oil Stocks To Watch

Chevron ( NYSE: CVX)

Chevron stock
Chevron stock

Chevron is the largest oil producer in the U.S and operates a diverse portfolio of energy equities. Due to its extensive portfolio, Chevron has no problem with generating cash. Chevron posted strong quarterly results in October, while Chevron stock isn’t exactly in a bull market, it can be expected to grow at a steady rate in the foreseeable future. For income-focused investors, Chevron delivers a high dividend yield of 3.8%, which gets paid quarterly.

CVX stock is less risky than most of the other major oil equities because it has already encountered selloffs this year making it a cheaper buy. The low risk makes Chevron an oil stock to watch.

BP plc (NYSE: BP)

BP stock
BP stock

Despite being a hard sell, BP’s dividend is undeniable. Since 2012, the BP stock dividend has increased. BP shareholders are currently enjoying a payout of $2.46 per share, with a yield of 6.5%. Even if BP stock price stays within its range, its dividend will continue to be high and present investors with an incentive to buy.

It is arguable that BP is still feeling the backlash from the 2010 Deepwater Horizon oil spill. It is still early too early to tell if the recent oil price drops have given an entry point into BP stock. However, the strong dividend and low P/E ratio dissipate most of the risk with BP stock.

Diamondback Energy (NASDAQ: FANG)

Diamondback energy stock
Diamondback energy stock

Diamondback Energy is slowing down its drilling business to focus on improving its cash flow due to recent oil price slashes. The money saved will be given back to shareholders, Diamondback intends to boost its dividend by 50%.

What makes Diamondback stock attractive is that it is sending money back to investors. The cut back on costs is helping Diamondback wether the storm of low oil prices, which makes it an oil stock to watch.

Royal Dutch Shell (NYSE: RDS.A)

Shell stock
Shell stock

Shell, like most of the larger oil companies operate in all sectors within the oil business. Shell is more renowned for its upstream business, although it does produce and sell products. The products that Shell manufacturers range from LNG, electricity and other chemicals. Shell’s downstream service provides Shell stock with some resistance against volatile oil prices.

Shell stock price has traded within a range for over 20 years, making its risk factor low. Investors are usually attracted to Shell shares because of its strong dividend. Shell’s stock dividend payout it $3.76 per share, with a yield of 6.5%.

It is unlikely that Shell will experience huge upside in coming months, due to the nature of the oil industry and the stocks landscape within the sector. However, smaller gains can still be made even in the current oil market conditions, making Shell an oil stock to watch.

Oil equities seem to be following a similar pattern recently. With oil prices lowering, capital spending is decreasing, with the money that is being saved going back to investors. Money is reaching investors pockets either through higher dividends or stock buybacks. This process is helping cash flow. The equities that make out “oil stock to watch” are ones that can resist significant impact from declining oil prices.