| | | I might be a bit early on this trade - we'll see.
I have been pursuing to build a position in XOM.
XOM's 5 year low is $64.65 (made in the general market sell of late December of 2018). Exxon has a 10 year low of 55.94 in July of 2010 - back then the annual dividend paid was $1.76 vs the current $3.48 annual dividend.
Today, @ 12.32, I have sold 10 December $67.50 puts for $2.30. If assigned , my net purchase price will be $65.20 (less than a quarterly dividend above the 5 year low). That would produce a dividend yield of $3.48/$65.20 = 5.34%.
If that put expires to $00.00 it would return an annualized return of $2.30 / $65.20 = 3.5276 / .167 (two months - i don't count fractions of the current expiration - October) = 21.12% annualized (which seldom happens).
With the solid balance sheet of XOM and their development of the permian natural gas , oil, and natural gas liquids, coupled with their participation of the Gulf Coast pipeline to Corpus Christi, and their largest ever steam cracker in Corpus, as well as their plastics plants in the Houston Ship Channel, I believe they have secured excellent free cash flow at even very low prices of crude.
This position will be a very long term buy and hold. If price drops lower, I have 62.50 and 60:00 puts sold as well. If price holds here, they will help me pay for the 70's I've sold.
If this gets me underwater ,I'll use the dividend stream to average down and buy more shares for a nice raise into next year.
I'm of the opinion that the energy sector is one of the most disliked. To me it is apparent that fossil fuels by necessity will be around for a long time.
To me the discounted cash flow of these vertically integrated oil companies is being overlooked. Most likely due to the hype and over zealous expectations of EV's, and the unfairly disclosed true costs of renewables.
Growing emerging markets assure that the internal combustion engine will be around for a long time. Not that EV's won't have their niche, they will, but it will be both slower and smaller than be hyped now.
Renewable energy is very opaque as to what its true costs will be - where due recycled photovoltaic panels get disposed of after their life cycle is over? no one knows.
Those who have bought into renewables are currently experiencing a tripling of their energy costs - that does not support lean and efficient industry. When that is needed guess who will get the rebates on energy (as in Industry) and who will be paying the tab (The people).
politico.eu
A lot of hype and a lot of unknowns = a bubble in the makings. imo
Please do your own due diligence - I'm not a broker.
Hope it helps.
Bob |
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