Purchase 48 shares Occidental Petroleum

For my purchase of this month I got inspiration from the dividend Bert’s October Dividend Income Summary. Normally I share many stocks on the dividend received list of other dividend bloggers, but in October there was not a single one company I shared with Bert.

This inspired me to take the companies from his list do some research about those companies and in the end I added Legett & Platt, Occidental Petroleum and Illinois Tool Works to my watchlist.

When selecting my potential buy for November, Occidental Petroleum was immediatelly scoring very high in my ranking model and I decided to place an order.

Occidental Petroleum is mainly scoring high in my ranking model based on their cashflow, yield and from being around their 52 weeks low.

On the otherhand I also deduct some ranking points in my model as Occidental is also having some higher than average risks such as possible short term issues related to integrating Anadarko, possible stock dillution due to the warrants given out to Berkshire Hathaway as part of a financing deal and maybe even a dividend reduction to fund debt reduction. Although the cashflow should be sufficient to continue the current dividend.

Occidental Petroleum is YTD down almost 40% and I consider this a good moment to start a position in Occidental Petroleum and I purchased 48 shares at $38,32.

With this purchase I add $151,68 to my yearly estimated dividend income. My yield on cost based on the current dividend of Occidental Petroleum is 8,25%.

2 thoughts on “Purchase 48 shares Occidental Petroleum”

  1. Erik,
    What are your thoughts about the massive amounts of debt that Occidental Petroleum picked up earlier this year? Aren’t they close to $55 billion in debt over their recent acquisition ? – which is why I thought the stock was down for most part of this year. I’m sure you’ve considered this already prior to your purchase of shares. I’d be interesting to hear what you think – to reconsider my earlier position of not purchasing OXY.

    1. Normally I would say that debt is not a big issue, because with the debt cashflow generating assets are purchased. In the case of OXY the discussion for me is more in the assets purchased with the debt are purchased against a fair value. I think OXY did overpay for Anardarko and I think this is having an impact on the stock price and will maybe even result in the future in a non-cash write-off.

      On the otherhand I think that the debt is manageable. OXY is selling assets to reduce the debt and is also able to use the operating cashflow in the future to reduce the debt. I don’t like they cut the capex for next year to repay the debt, because I normally they would have use the capex to invest and generate more cashflow.

      Overall I think that in the market is too negative about OXY and this makes it for me a good moment to buy stocks, but I can also understand that investors want to wait a bit and see how OXY will manage the integration of Anadarko and only start a position when it’s clear that no new challenges are arising.

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