Oil stocks have been performing dismally this year, and oil prices have failed to sustain a rally, so why are these stocks still attractive? Low valuations and high dividend yields, say analysts.
Supermajor oil companies are living a new reality that is based on new profits in a forever-low oil price environment—and globally, analysts say, the oil sector is a great investment.
Value has returned, because international oil giants have adapted.
The initial enthusiasm over OPEC’s production cut deal died out rather unceremoniously, and oil prices only enjoyed a brief rally, hammered down continually by rising U.S. supply and slower-than-expected drawdowns on inventory.
Since the beginning of the year, the oil stocks have underperformed the broader market indices both in the U.S. and in Europe.
As of the early morning on August 18, the Stoxx Europe 600 Oil & Gas index—which includes Europe’s majors Shell, BP, Total, Statoil, and Eni, among others--was down 11.94 percent year to date.
At the same time, the Stoxx Europe 600 index was up 4.27 percent year to date.
It’s all rather bleak. Until you look at dividend yields and valuations.