So -- as I always point out in this thread -- I'm trying to give people food for thought... using real life examples - of which - in order to demonstrate what I'm talking about... it helps to use "an" example. In this case we're going to use Chevron (CVX).
Gas and Oil are in the tailspin of too much product - not enough usage. So it's a war on prices. This is a CLASSIC example of when there's too much of something - the price will reflect that. The old "more sellers than buyers". What happens when it's the reverse? Prices go UP. Given the worlds oversupply of crude oil right now - the US is in a battle of supply against the other producing countries. They'll give their's away in an effort to crush our producers. THEY only have one thing to sell (export).... their lives depend on the price of crude. Tough for them.
So more importantly - let's talk about DIVIDENDS. The dividend on CVX is up to 4.8%!! WHY?? Because the price of the stock has dropped some 22% year to date -- and 33% in the last 12 months!! As the price of the shares decline - the dividend PERCENTAGE goes up. This is fantastic IF and AS LONG AS they can remain profitable and continue to pay out the same dividend!!!
We discussed the P/E of some of the high fliers! Some are 181 ish and higher - or in the 40's and 50's!!! What's CVX at....... 9.7
What I'm pointing out here is the RELATIONSHIPS of these numbers. I'm not saying to buy CVX or any other stock... It's just a learning "item". We don't often get a chance to see this kind of phenomenon in such a short time span!
I picked on CVX -- because typically I like infrastructure plays over say - a producer. The producer has to get his product to market. As do other producers - so I like guys that pump it thru pipes to the other guy (the refiner). But when you see a CVX - which is a producer and a refiner go "on sale" - I start to watch. Remember that we don't want to try to catch a falling knife.... time to sit back - put something on your radar - and let it play out. But opportunity usually comes following the old "blood in the streets" scenario! When NOBODY wants to own something --- that's usually a good time to pick away at it. The world will continue to burn up oil and gas.... and as economies around the world stabilize (as ours has) and demand picks up... there CAN BE opportunity.
I'd like to see CVX get down to where the ratio is like 5% dividend or maybe even a little more... 5.5% or so would be OMG.... At that point I'll start picking at it. LOL
To me - it's like the housing market.... the guys that are killing it now - are the guys with the balls to have bought when nobody in their right mind was willing to buy a house! Now those people wished to hell they had bought a dozen of them!! LOL
Think long term! You might get killed for awhile - but if the dividend payout is worth it - it can work out nicely.
REMEMBER -- I'm not saying to buy "X" or "Y" or "Z" ---- I'm saying to be looking for opportunity and then have the balls to take advantage of it.
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