Occidental Petroleum Corp (OXY)

[Timothy Smith]

Oxy is trading around $89, with a price to book of 1.8, and a forward price to earnings of 10.2. This is a slight premium over most of its peer group influenced by Oxy's strong earnings and record production as analysts look forward to a natural gas price rebound. Exxon Mobile is trading at an even larger premium, around $88 with a price to book of 2.5, and a forward price to earnings of 9.9.

By comparison, Devon is trading around $59, with a price to book of 1.1, and a forward price to earnings of 8.7. Clayton Williams is trading around $49, with a price to book of 1.5, and a forward price to earnings of 7.6, while Marathon is trading around $27, with a price to book of 1.1, and a forward price to earnings of 7.6.

Oxy's relatively low dividend and payout ratio compared to its peer group is causing some analysts to predict a dividend increase in the near future. Given Oxy's history of reliable increases, I don't think that this prediction is far off the mark. With a stronger cash balance than most of its peers, driven in part by better earnings, Oxy's dividend yield seems low.

Competitor Devon has a current yield of 1.25%, while Marathon Oil (MRO) is doing slightly better with a current yield around 2.5%. However, increased dividend or not, Oxy is a strong value play.