ConocoPhillips (COP): ‘Rock Solid Financials’

“I suspect that as long as the dollar continues its slide our focus on commodities and resource stocks focusing will prove rewarding,” says Jack Adamo.

The editor of Insiders Plus explains, “For our latest buy recommendation we’ll revisit an old favorite of ours. Over the years we’ve held 4 positions in ConocoPhillips (COP) and they’ve gained an average of about 32% for us.

“We last sold the stock in 2009; at the time I was turned off by the company’s overpayment for Burlington Resources at the height of the natural gas market, and even more so by its big investment in Lukoil, the Russian oil company.

“Conoco finally wised up on Lukoil and got rid of the last of its stake earlier this year and even managed to make a small profit on it.

“Prior to these two gaffs, the Conoco’s management had a great track record of increasing shareholder value, and it is currently in the process of slimming down further to focus more on its most profitable assets.

“Management seems chastened and has apparently gotten over the urge to get big for the sake of size itself.

“With its prior good record, we can assume that period of silliness was brought on by the heady atmosphere of oil rising from $40 to a hundred-something dollars in a matter of a few years.

“Conoco’s balance sheet is rock solid with operating cash flow covering interest payments more than 14-times.

“The company has raised its dividend at a healthy rate every year of the last decade, save one, and still has a nice yield, currently at 3.4%.

“Its payout ratio is a very small 27%, meaning it has plenty of room to raise dividends in coming years. In fact, the company spent about 33% more last year buying back stock than paying dividends.

“I’d prefer it just paid higher dividends, but in any case, it’s clear the company has plenty of free cash with which to reward shareholders. Buy Conoco-Phillips up to $85. Take a 4% position in our main portfolio.

“Reasons To Buy Conoco-Phillips:

* Great long-term track record of enhancing shareholder value.
* Rock-solid balance sheet
* Good dividend with history of 14.5% growth over the last decade
* Low payout ratio leaves room for higher dividends and more stock buybacks

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