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Dividend Investing Stocks (Archived)

MUR - Murphy Oil Corporation

Dividend investing is a popular strategy with investors seeking an income stream. Dividend investors can be placed into two broad categories.

  1. The growth approach - buy dividend paying stocks with emphasis on the company's ability to grow and increase its future dividend payments (to maximize the future yield).
  2. The yield approach - buy dividend paying stocks at cheap prices (to maximize the current yield).

Dividend investors using the growth approach tend to look for the same basic growth characteristics as found with growth investing, but the stock must also pay a reasonably reliable dividend.

Dividend investors using the yield approach tend to be more concerned with the stock price and the companies ability and willingness to pay a regular dividend rather than its ability to expand.

Sometimes a company will satisfy the requirements for both approaches.

In the June 2014 issue a fundamental analysis is conducted on a selected sample of stocks. The analysis is based on fundamental data from one year ago. This allows financial students and investors to see how the stock price performed over the next 12 months after the hypothetical purchase.

Murphy Oil Corporation

Murphy Oil Corporation NYSE:MUR is a large-cap oil & gas company and its stock trades around $90 million per day. MUR is a mature company that was founded in 1950 and has a long established history of paying dividends.

The key fundamentals for MUR are shown below.

Growth fundamentals for MUR

YearRevenueEPS ROEDividendBook ValueEmployees
200352701.60 15%0.3510.604780
200482903.83 26%0.3814.402130
2005116004.55 24%0.3918.602260
2006142003.40 16%0.4921.602470
2007184004.06 15%0.6226.702890
2008274009.12 28%0.8132.903200
2009189004.39 11%0.8638.403260
2010200004.13 10%0.9342.403460
2011276004.50 10%0.9545.303170
2012286005.07 11%3.2146.903490

The fundamental data above shows that MUR has broadly increased its revenue, earnings, dividends and book value over the last decade. These are the characteristics of an expanding company which indicates that MUR is a growth stock that pays a regular dividend.

It should be noted that the 2012 annual dividend did include a special dividend of $2.43 rather than the $0.27 it had paid for the last quarter - this means the dividend for 2012 would have been around $1.05 without the special dividend payment.

Fundamental Analysis for MUR:

The return on equity does vary somewhat and ranges from fair to good. The profit margin (profit to sales ratio) is quite low and ranges from 3% to 8% over the last decade - this is expected as the company operates in a capital intensive industry.

The current ratio (current assets to current liabilities) ranges from 1.2 to 1.6 which indicates that MUR has a sufficient amount of working capital.

The debt ratio (long-term debt to tangible assets) averages around 2.0 which means that MUR carries a moderate amount of long-term debt. Intangible assets and goodwill are not included in the ratio calculation. The tangible assets are used for the ratio calculation because these are hard physical assets that can be sold off in the event of bankruptcy liquidation whereas intangibles and goodwill cannot be sold.

The total ratio (total liabilities to total assets) averages around 40% which means that MURs total debt is 40% of its total assets.

Both the revenue and earnings growth for the 2013 fiscal year are projected to grow at 4% (based on the five year growth trends).

The forward PE ratio is around 12 (calculated from the five year earnings growth trend rather than from forecast earnings). The forward PEG is around 2.6.

MURs book value is around $47 and the current business valuation is around $69 (with a 2.0% ten year Treasury bond yield). This means that MURs earnings based on its assets is worth more than its ability to growth its earnings. This is not unusual for a mature dividend paying company.

The bankruptcy risk can be calculated using the Z-score. MURs Z-score is 3.4 which means MUR is a low bankruptcy risk stock.

The sample analysis uses data that is one year old. The hypothetical purchase date for the stock is 23-May-2013 and this allows the reader to see how the stock performed over the next year.

MUR had its 2013/03 quarterly results released prior to 23-May-2013 and this information is available for the analysis. The 2013 Q1 earnings showed an increase of 26% over the same quarter from a year ago (2012 Q1). The 2013-Q1 dividend is $0.27 for the quarter which is a 14% increase over the same quarter from a year ago (2012 Q1).

Overall the fundamentals are strong with this large-cap dividend paying stock which has some growth characteristics as a bonus. Additional information such as consensus forecast earnings, broker recommendations and insider transactions are not considered for this sample analysis. A hypothetical position taken in MUR on the 23-May-2013 would give a purchase price of around $59.

The stock price performance is shown below in Chart 1. along with the annual earnings year to year growth. The stock chart is adjusted for splits and dividends.

Chart 1. Stock chart with earnings for MUR

weekly Chart MUR

As shown in Chart 1. above, MURs gained around 10% over the next year including dividends. MURs 2013 annual earnings increased by 13% over the 2012 fiscal year and its 2013 dividends were $1.17 (which is an increase of 11% when the special dividend in 2012 is excluded).

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