COP Stock: Is ConocoPhillips a Good Investment?

Major oil company ConocoPhillips (COP) pays one of the fattest dividends around, with a current dividend yield of 5.6%. But with the price of crude oil still stubbornly below $50 per barrel, how safe is that dividend? And for that matter, is COP stock even worth bothering with in this market? ConocoPhillips CEO Ryan Lance said that the company was committed to a “compelling payout,” which most investors took to mean that the dividend was safe for the time being. And as recently as July, ConocoPhillips actually raised its dividend by a penny per share. But is it sustainable?

The ConocoPhillips dividend is safe for the foreseeable future. But what about the second question: Is COP stock is worthwhile to own at current prices? That’s a harder question to answer. The dividend yield alone makes the stock interesting, though a 5.6% dividend is hardly consolation when you’ve lost about 20% year-to-date due to share price losses. Looking at the Shiller price-to-earnings ratio, or the cyclically adjusted price-earnings ratio (“CAPE”), we certainly see a cheap stock. At a CAPE of less than 9, COP stock is among the cheapest in the S&P 500. Ultimately, it will likely be crude oil prices that make or break COP stock. ConocoPhillips can limp along for years with crude oil at current prices, keeping its dividend intact. But here we are talking about a company that is simply treading water, and a cheap stock can remain cheap for years without a catalyst to drive it higher.

Source: InvestorPlace

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