ConocoPhillips Churns out Profits

07/22/2013 6:00 am EST


David Fish

Executive Editor, Moneypaper

Perhaps the best part of owning stock in the best companies in America is the fact that those companies share the profitability in the form of dividends, suggests David Fish of the MoneyPaper.

When those companies turn their expertise and brand strength into rising profits, shareholders enjoy rising income streams that can continue to grow for decades.

The formula is no secret, but can be just boring enough to avoid becoming a crowded method, which might drive stock prices up too far too fast, something that can easily happen with trendy hot stocks or sexy-sounding trading techniques.

Dividend growth investors do much better over time by owning companies that churn out essential products and services and pass along real profits to their shareholders.

Our latest featured dividend reinvestment stock is ConocoPhillips (COP), which was formed in 2002, when Phillips Petroleum, which dates back to 1917, acquired Conoco, creating an integrated oil and petrochemical company with close to $200 billion in annual sales.

In 2012, the company spun off Phillips 66, shedding its downstream (retail) operations and sold its 30% stake in Russia's Lukoil, becoming exclusively an exploration and production company with about $55 billion in annual revenues from operations in North America, Europe, Asia, and Australia. Its North American business includes growing shale and oil sands production.

Consensus estimates call for the company to earn about $5.51 per share in 2013 and to net about $6.00 in 2014, compared with $5.37 in 2012. The dividend, which provides a 4.3% yield, has increased for 13 consecutive years, but represents less than half of earnings.

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