Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM) are showing dividend growth rates up to 12% and payouts of up to 25% of earnings, supporting the lengthening mortality of the oil sector, says Eric H. Jostrom, Chairman and Chief Investment Officer of Ipswich Investment Management Co., Inc.
“We…like the way the oil companies have come around to addressing the payout issues, and we think that will continue to support interest in these stocks. When you have companies like Chevron (CVX), which has a one-, three- and five-year dividend growth rate between 9% and 12%, and Exxon (XOM), 10% — and yet these stocks are still in low double digit p/e, yes they are up from eight times or nine times, but the payout on Exxon is something around 25% of earnings. So those things are all very positive,” Jostrom said.
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Jostrom takes on a global perspective when looking the expected mortality of sectors, and he believes that the major oil companies are the longest-living ones to invest in. Additionally, Jolstrom sees growth prospects for the sector with new developments in technology.
“We came to the conclusion that the major oil companies are probably the longest-lived companies that one can invest in, and that they basically have reserves and other activities that will carry them to plus or minus 75 years. Some can say that oil is a depleting asset, but we take the view that with all the assets that the oil companies have, they continue to get a significant extension of their life and prospects for growth due to developments in technology,” Jolstrom said.
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