Friday, January 30, 2015

Stock Purchase: NOV

On 01/28/2015, I bought 50 shares of National Oilwell Varco, Inc. (NOV) at $55.99.

Recently I took advantage of oil price plunge and accumulated shares in companies related to oil industry, such as CVX, XOM, NOV, and HP

National Oilwell Varco is a leading worldwide provider of equipment and components used in oil and gas drilling and production, oilfield services, and supply chain integration services to the upstream industry.  NOV provides all the heavy equipment necessary for oil and gas drilling, including rigs, derricks, rotarys, blowout preventers, mud pumps, wireline winches, cranes, drill pipes, drilling motors, drill bits, and transfer pumps, among many other products. They are apparently a one-stop shop for their clients.

NOV is an exceptionally well-managed company, which we can see from my stock purchase criteria.  This company passed all my criteria.

NOV is one of the companies in David Fish's Dividend CCC list.  It is a dividend challenger with 6 years consecutive dividend increase.  NOV has a S&P quality ranking B+, and Morning Star offers a generous 5-star rate to this company.

NOV pays dividends quarterly.  The last time it raised dividend was in Jun, 2014 with an increase rate 77% from $0.26 to $0.46, which makes the new annual dividend amount to $1.84.  With my purchase price at $55.99, my yield rate is 3.28%. Quite decent!

Currently NOV's payout ratio is 23.50%, which leaves large room for future dividend growth.  The average DGR in the past 5 years is 50%.  It's Chowder number is 80.97%, reflecting high current yield and high growth of the yield.  With the current turbulent oil prices, I won't expect much dividend growth in one or two years.  But in the long run, I have confidence that NOV's dividend will increase even more.

NOV's 10-year EPS growth rate is 31%.  It has a very low debt/equity rate at 14%.  Below chart illustrates the amounts of EPS, Free Cash Flow (FCF), and annual dividend.  The chart proves that NOV has healthy finances and a lot of room for dividend increase.

 NOV stock price plunged this week because Credit Suisse downgraded NOV to an Underperform rating from Neutral and lowered its target price to $43 from $60.  I believe this offers an excellent opportunity for long-term investors.

Disclosure: Long NOV.

1 comment:

  1. I think NOV, XOM, CVX, RDS-B, CHK, SLB, and NOV are all good buys. But only if your intended holding period is roughly "kingdom." The oilpatch is volatile. She booms. She busts. And no one, not even the analysts working for said companies can tell when which will occur. I spent about a decade working for BHI and learned the hard way that oil business, while capable of high returns, is beset by forces that are oftentimes completely irrational.