I purchased 40 shares of COP.WI @ $55.66/share this morning.
As many of you know, ConocoPhillips plans to separate their refining business from their upstream oil exploration and production business at the end of the month. Phillips 66 (currently priced as PSX.WI) will become a separate publicly traded refining business with ticker PSX. For every 2 shares of COP held, you will receive 1 share of PSX. COP also plans to payout 20-25% of their Operating Cash Flow (OCF) as a dividend which I believe would keep their existing dividend of 2.64, giving it a YOC of about 4.7% at today's price. There's a good article here on Seeking Alpha.
I hold 30 shares of COP today so I will receive 15 shares of PSX. My plans are to sell the PSX shares which will be yielding just a little over 2%. I will keep the new COP along with the 40 shares I purchased today for a total of 70 shares.
Investors have 3 options for playing COP right now. You can buy COP pre-split with the normal ticker, you can buy shares of the new COP (COP.WI) or you can buy shares of the new Phillips 66 (PSX.WI).
Nice buy. I may start a position in the new COP (the upstream business) at some point later this year to increase my portfolio's weight in the energy sector (I currently own CVX).
ReplyDeleteHey deedubs,
ReplyDeleteMy thinking is that I want to be a little overweight in energy and healthcare for my portfolio. I'm not quite there yet but hope to have a nice balance in a year or two. The baby boomers are all retiring and I believe these two sectors are going to outperform the general market.
Nice buy. Why are you going to sell PSX? The low yield? Uncertainty?
ReplyDeleteFor now I plan to hold both companies. In the foreseeable future I will only consider adding to COP until I know more about the direction PSX is heading. I'm excited about the spinoff.
Hi CI,
ReplyDeleteThanks for stopping by. I'm selling PSX partly because of the low dividend and partly because I don't think it will have a high enough dividend growth rate. I could be wrong though. I try to focus on stocks that yield at least 3%. I do own OMI at a 3% yield and NSC at a 2.75% yield but they have 5-year DGR's of 14.7% and 19% respectively.
Nice purchase here.
ReplyDeleteI like COP a lot, and it's my largest energy holding right now. I love all the big oil plays, including TOT, CVX and to a lesser degree XOM and BP. I sold out of XOM because of the low yield coupled with the low DGR, but it's a fantastic company.
I like your thinking on being overweight energy and health care. Although I generally prefer to hedge my bets and fairly evenly distribute my wealth.
Best wishes!
Hi austinbroker,
ReplyDeleteGood purchase. I like the energy sector and own COP; I am interested to see how this split plays out. For now, I am a "hold" on COP, only because I don't want to become too overweight in one company.
I am considering initiating a position in ExxonMobil (XOM) since they recently announced a 21% increase in their dividend (from $0.47/share to $0.57/share). The yield is much lower than COP* but the dividend raise might signal an emphasis on becoming more shareholder-friendly (to those of us that buy-and-monitor).
Take care!