Today’s dividend stock research is on Helmerich and Payne (symbol: HP). HP is among the oldest oil drillers that has had the ability to survive due to its prudent management.
HP is now selling 6.72% above it’s 52-week low. According to Standard & Poor’s stock report, HP sports a Price-to-Earnings ratio (P/E) of 10, which is well below its 10-year average of 17. This presents an opportunity to buy at or near the lowest price relative to historical earnings.
Imagine keeping a company profitable while at the same time rewarding investors for their patience. The executive team at HP has managed to increase its dividend every year for the last 28 years. This implies that the management team knows exactly how to run a company in a volatile industry.
If we were to look back 28 years ago, we would find that the Oil & Gas drilling sector experienced tremendous growth due to the OPEC oil cartel in the late 1970’s. The cartel forced major oil companies to seek oil supplies from non-traditional regions of the world. This meant significant growth in oil services drillers who built oil platforms and oil rigs that could be easily be built anywhere around the world.
However, as the oil cartel lost its grip on the price of oil, drilling companies had already over-committed themselves by borrowing excessively to meet anticipated demand that never materialize and flooded the market with too many rigs. The drilling industry went into a nose-dive which left only a few companies standing, HP being among them.
HP has fallen 42% from the 52-week high of $40.24, which implies that significant opportunity exists for upside potential. HP moved to the $40 range mainly due to the fact that the price of oil rose so much. Now that the price of oil has fallen from a high of $79 to the around $60 there exists the feeling that oil will continue to fall.
A decline in the price of oil is the most likely risk facing this stock. Many commodity analysts, such as the famed Jim Roger, believe that we are in the early stages of a commodity bull market. And while we might not be at the peak of this bull run there will be many brutal dips to the downside between now the next market top. Since oil often moves in unison with political and economic turmoil I expect that a decline of at least 33%-66% is waiting in the wings before rebounding to its ultimate top.
HP is now selling 6.72% above it’s 52-week low. According to Standard & Poor’s stock report, HP sports a Price-to-Earnings ratio (P/E) of 10, which is well below its 10-year average of 17. This presents an opportunity to buy at or near the lowest price relative to historical earnings.
Imagine keeping a company profitable while at the same time rewarding investors for their patience. The executive team at HP has managed to increase its dividend every year for the last 28 years. This implies that the management team knows exactly how to run a company in a volatile industry.
If we were to look back 28 years ago, we would find that the Oil & Gas drilling sector experienced tremendous growth due to the OPEC oil cartel in the late 1970’s. The cartel forced major oil companies to seek oil supplies from non-traditional regions of the world. This meant significant growth in oil services drillers who built oil platforms and oil rigs that could be easily be built anywhere around the world.
However, as the oil cartel lost its grip on the price of oil, drilling companies had already over-committed themselves by borrowing excessively to meet anticipated demand that never materialize and flooded the market with too many rigs. The drilling industry went into a nose-dive which left only a few companies standing, HP being among them.
HP has fallen 42% from the 52-week high of $40.24, which implies that significant opportunity exists for upside potential. HP moved to the $40 range mainly due to the fact that the price of oil rose so much. Now that the price of oil has fallen from a high of $79 to the around $60 there exists the feeling that oil will continue to fall.
A decline in the price of oil is the most likely risk facing this stock. Many commodity analysts, such as the famed Jim Roger, believe that we are in the early stages of a commodity bull market. And while we might not be at the peak of this bull run there will be many brutal dips to the downside between now the next market top. Since oil often moves in unison with political and economic turmoil I expect that a decline of at least 33%-66% is waiting in the wings before rebounding to its ultimate top.
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