ConocoPhillips (NYSE: COP) Plans To Increase EPS By 10%

ConocoPhillips (NYSE: COP) is one of the largest gas and oil companies in the world. The firm has a market cap of just under $100 billion, over 18,400 employees, and has a sphere of influence in 27 countries.

Current Events

The oil and gas firm posted production growth rates of 6.5% in the second quarter of 2014 from the same quarter a year ago in 2013. Prior to that, the corporation’s production growth had decreased by 2.5%.

The company is currently making the switch from using reserves with higher costs to using reserves with lower costs of production reserves. As a result, its production costs are dropping. The margin per barrel grew by roughly 2.5% year over year.

ConocoPhillip is on its way to reaching a production growth of 3% to 5% over the 2014 fiscal year from the 2013 fiscal year. The company expects to increase production by 3% to 5% per year until 2016. It also plans to increase its margins between 3% and 5% each year, and reach a growth rate for earnings per share of 6% to 10%. If you consider the firm’s dividend yield, which is currently hovering around 3.5%, investors can hope to see a CAGR of 9.5% to 13.5% to 2017.

Growth

ConocoPhillips has made efforts to ensure that production grow by 3% to 5% each and to raise margins by 3% and 5% a year by 2017. The company can hit those figures by focusing on low cost production. The company will increase the production of North American Unconventional oil and Oil Sands oil at over 20% a year until 2017. ConocoPhillips gets over $40 for each barrel of North American Unconventional oil it produces, and between $30 and $40 for each barrel of Oil Sands produced.

Additionally, the combination of its rapidly increasing production rates in the region as well as having the lowest production costs for North American Unconventional ConocoPhillips is the leading producer of the oil.

While the majority of ConocoPhillips’ growth is from oil fields in North America, the company has locations all over the globe. The company has major oil facilities on six continents, and it is constantly testing locations all over the world to find places to construct oil reserves.

How ConocoPhillips Fared During The Recession

During the 2007 to 2009 recession, ConocoPhillips was able to remain profitable, but its internal operations took a hard hit. The company’s earnings per share dropped from $10.66 in 2008 to a low of $3.24 in 2009. Since then, the company’s earnings per share has not climb back up past $9.00. During economic downturns, the price of oil generally drops, and companies make less revenue on each barrel of oil that it produces. ConocoPhillips states that its profitability will change by roughly $80 to $90 million for each $1 shift in the price of oil.

ConocoPhillips vs. Other Dividend Growth Stocks

Based on market cap alone, ConocoPhilips is the largest independent gas and oil company that is publicly traded. In the energy industry, it has worldwide influence. The company has a strong dividend yield and a plan to grow earnings per share of the next 3 years.

Years of Increasing Dividends

Ever since 1987, the company has not cut its dividend payment. Clearly, if the company has been steadily increasing or keeping constant its dividends, then it can grow and remain profitable over a variety of economic conditions.

Dividend Yield

Currently, ConocoPhillips has a 3.42% dividend yield. Compared to 132 other companies who have also gone over 25 years without reducing their dividend yield, ConocoPhillips offers the 28^th highest dividend yield. The company’s relatively high dividend yield makes it appealing to investors who want to quickly make money the current environment of low interest rates.

Payout

At 42%, ConocoPhillips’s payout ratio is the 63^rd lowest out of the 132 businesses mentioned above. The company’s rather low payout ratio means that it has room to grow its dividends faster than its overall company growth.

Growth Rate For The Long Term

Over the last ten years, ConocoPhillips’s growth has held stagnant. It managed to raise its dividend payments by only 2.25% per year, which is the 101^st highest out of the 132 businesses mentioned before. The company will probably increase its revenue and earnings per share and dividends much fast over the next several years now that it has found strength in its Unconventional North American oil.

Volatility in the Long Term

ConocoPhillips has shown over the years that it is highly volatile, due to its vulnerability to changes in oil prices. Its standard of deviation is 30.45%, which is the 79^th highest out of the 132 businesses mentioned.