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Buy Total (TOT)

posted on May 28, 2010 at 3:50 pm
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  I’m sure this one is going to be popular. (Yeah, right.)

Today, May 28, I’m adding Total (TOT) to the Jubak Dividend Income portfolio.

 That’s right a European (gasp) oil (shudder) stock.

 Total’s shares have dropped from $65 at the beginning of 2010 to $45 now. That’s driven the yield up to 6.5%, considerably above the yields for U.S.-based oil companies such as Chevron (CVX) at 3.8%.

The company increased production in the first quarter by 6% and while its refinery business is running way below capacity (and it being France Total faces intense political pressure not to close any refineries), it’s chemical unit has enjoyed the same cost-savings and demand recovery that have buoyed stocks such as du Pont (DD).

 With any oil company these days an income investor has to ask how safe is the dividend if oil prices continue to fall or just stay at current depressed levels. Total finished the first quarter with a very modest 34% debt to equity ratio and with $17 billion in cash and cash equivalents on its balance sheet. The dividend looks secure to me.

Full disclosure: I don’t own shares of any stock mentioned in this post.

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30 comments

  • yx on 28 May 2010

    I bought TOT late July 09. At one time I had more than 20% paper gain, but I did not sell it then. Now I have 10% loss on it. It’s killing me when I think about it. This is one of the cases that I learned you must take it and run when you have it!

  • yx on 28 May 2010

    Jim:
    How do you think both TOT and STO cut dividend this year?

  • cjxland on 28 May 2010

    Jim

    Two caveats for those TOT dividends:

    The French tax those divs at 25%; I’m told this can be recovered on US Form 1040, Foreign Investmnent Tax Credit- someone will know how. [I just factor that in- still pretty good yield.]

    The other is that TOT and various other E-zone companies pay their divs in Euros- which are plummeting, more or less. A possible hazard for div yield here- paid in $$- if the Euro drops a lot more with respect to Dollar.

    Full disclosure: I own shares of TOT in my personal portfolio, and will buy some more soon.

  • reineke on 28 May 2010

    Dividend is paid twice per year. It popped right after going ex-dividend. Sold off as if they were leaking oil all over the Champs-Élysées.

  • cjxland on 28 May 2010

    yx

    Where did you find your info that TOT has cut their dividend?

    I believe they either maintained their dividend for this year or raised it a bit. So do they, on their website [it is a bit difficult to figure this out, but M*Star is showing an increase for 2010 as well- possibly partly estimated?] They have a bad habit of raising their divs regularly- and strongly- part of the enticement to own them. Someone has already noted that they only pay twice a year, and it is based on earnings, to a large extent.

    Maybe the $ payout on the ADR was down some due to Euro plummet?

  • crp0001 on 28 May 2010

    Foreign taxes paid will be reported on your yearend Form 1099 from your brokerage. They are reported on page 2 of your Form 1040 (and Form 1116 depending on the amount). Effectively, a dollar of foreign tax paid is treated like a dollar of US income tax paid (think withholdings on your W-2). In this example, if you receive $12 foreign dividend (forget currency issues for simplicity) and pay $4 (25%) foreign tax you’ll report the $12 dividend on Page 1 of the 1040 (and Schedule B, if required) and show $4 worth of taxes paid on Page 2 of the 1040 (Line 47 of a 2009 Form 1040).

  • yx on 28 May 2010

    My broker (a major mutual fund) listed it on its website, but you need be a customer to access it. (The broker said before its information was fed by reuter.)
    On that list, it had past 3 years dividends. The most recent payout is May 26. The amount listed is less than previous year’s. Same as for STO. That could be due to weak euro.

  • reineke on 28 May 2010

    The dividend is the same as last year 1.14 euro x 2 .

  • cjxland on 28 May 2010

    reineke- my information also. They may increase the interim div in Nov, but that is speculation only at the moment.

    crp0001- thanks, I thot it was something like that, and I knew someone would know. But what if I hold TOT in an IRA [I do]? No income to report, so I just take the tax hit?

  • reineke on 28 May 2010

    TOT has been increasing dividends substantially in the 2004-2008 period. They held steady during the crisis year. I just received my Nokia dividend. I got jipped! :)

    Yes, if you hold it in an IRA, you cannot claim the tax credit (but you’re also not paying any taxes either).

  • cwt334 on 28 May 2010

    Hey I got a pretty good dividend stock I was in during the crash. It is an integrated agricultural company –symbol: CHSCP. It is not volatile at all the beta is .04. The dividend is 7%. Check it out and tell me what you think.

  • reineke on 28 May 2010

    I bought the most volatile Chinese stock I could find. CHSCP is a preferred. “The shares entitle their owners to receive an annual cash dividend equal to 8 percent of the original 25 per share.” Trading at a premium.

  • squid on 28 May 2010

    anybody got an opinion on PTNR the Israely telecom?
    pays great dividend and gives a little foreign exposure and if they are in the Israel index that is now a developed country instead of a developing country there should be some buying power to support the price.

  • lameduck on 28 May 2010

    Gutsy James.
    For the dividend portfolio, OK. But for “total” return I like CVX better, more price upside. As you mentioned the French gov’t has too much to say about management. I recently traded out TOT for CVX myself.
    Great Memorial Day Weekend to all you Jubiacs!!

  • dieselpham89 on 28 May 2010

    My think same your think both TOT and STO cut dividend this year How do you can let me take it and run you know i not very good all way did stupid make alot people hate better you did the job then i just reading and learn in there

  • cjxland on 28 May 2010

    dieiselpham89

    Very well put!

    I do were there.

  • kailua on 29 May 2010

    Dividends for TOT and STD can be found at Yahoo Finance: TOT quote > Historical Prices > Dividends Only. As you will see the dividends are up and down over time. Nothing that you can count on Y/Y. Also under Key Statistics, the Payout Ratio is 60%. Ideally a payout ratio less than 50% is desirable for dividend sustainability.

  • yx on 29 May 2010

    diesepham89, cjxland:
    Absolutely can not understand your comments.

  • cjxland on 30 May 2010

    kailua- thx for the lookup info; I don’t use Yahoo Fin much, maybe I should start.

    Also tho, as you see, the divs for TOT have increased rather strongly over many years [they differ from spring to fall a bit, yes, but I think I CAN count on that div growth.] That is MY main interest- excellent yield today, strong dividend growth over time. TOT will be paying me about 20%/year in a few years- when I need it.

  • Dan1to on 30 May 2010

    TOT seems overly risky at this point just for the 6.5 yield. Im not sure the dividend, which is only paid 2x a year, is worth it. TRP seems a better, and much safer play. 4.5% yield with 4 payments a year. Jubak has used TRP in the past as well, although his last recommendation for them was about 3 years ago. TRP and ENB seem a better play. If you want the dividend for an income portion of portfolio, then EEP seems better? (8% yield)

  • Dan1to on 30 May 2010

    Or you could go for risk and go with BP who pays a large dividend. Then you just have to hope they fix that spill soon.

  • reineke on 30 May 2010

    While the dividend amount remained the same in the 2008-09 period the payout ratio was 30-something in 08. Earnings obviously dipped in ’09. Earnings are affected by refining (largest refiner in Europe) and other issues. Total owns a $3 billion stake in Sanofi-Aventis on which it recently received a dividend and which it has been selling off. The company’s size and scope allow it to pay a high dividend in lean times. It’s worth $53. Unfortunately it jumped after going ex-dividend. The company has said that intends to “maintain” the dividend.

    STD pays 50% of earnings. No special dividends in a while.

  • USDAportfolio on 31 May 2010

    Jim and others,

    If you are looking to rotate into a higher yielding stock, and perhaps looking to make a contrarian play in the Euro-zone while the recent Greek debt scare has caused price dislocations, a stock you may want to add to your wactch list is France Telecom ADR, ticker symbol FTE.

    If you are already overweight energy stocks, or avoiding oil stocks right now until the Deepwater Horizon mess is sorted out, FTE may be a good alternative to TOT. FTE has taken a similar beating during the recent corretion, and is now yielding 4.4%. If they announce a second dividend or special dividend, as they have in the past, the yield would be closer to 6-7%. Telecom stocks also tend to be more resilient than energy companies during economic slowdowns.

    The stock is not without risk. However, like STD, I think the market has over-estimated the risk to this stock. I believe right now that the stock is trading at a discount to fair value, even considering modest future Euro fluctuations relative to the dollar.

    Making a play here would require an assessment of your asset allocation and risk tolerance, to see whether FTE is a good fit in your portfolio. If you are significantly underexposed to the telecoms or to the Euro-zone, this stock may be a good fit.

    FULL DISCLOSURE: I don’t own shares of FTE, but it is on my watch list for consideration as a future buy.

  • EdMcGon on 1 June 2010

    There are plenty of good dividend stocks without stepping into the Euro-mess. I know the common wisdom on Wall Street is that European stocks are undervalued now. I disagree with this so-called common wisdom.

    It is one thing to say Chinese or American companies aren’t at risk for the European problems (although this needs to be looked at on a company-by-company basis, and even then there is potential for indirect risk). But France is smack dab in the middle of it. Even if you assume the euro will drop and a manufacturer like TOT will make out like a bandit, most of their profits will get sucked up by taxes. And if France has to raise taxes to afford it’s “big fat Greek bailout”, then a company like TOT will get hit even harder.

  • reineke on 1 June 2010

    Ed, sorry, you’re not a contrarian :)

  • L943973 on 1 June 2010

    I would just put a stop loss order around $43 just in case.

  • RM on 2 June 2010

    Barrons on TOT
    “An Oil Stock with a Supersized Dividend”
    http://online.barrons.com/article/SB127540034061399459.html?mod=BOL_hpp_highlight

    “OF THE SIX “SUPER-MAJOR” integrated-oil companies, Total is probably the least well-known to U.S. investors. But the French oil giant is worth a look, particularly as its stock has tumbled in recent weeks to a more desirable price.”

  • sescal on 21 June 2010

    Does anyone know how the foreign tax treatment is affected if you buy this stock in an IRA? Can you still get US tax credit?

  • nocnurzfred on 3 July 2010

    Recently sold STD for small profit, after being down big time. Added to UIL & now am 60% invested there. Big risk. Will expect runnup in price next week with the hot weather moving in for the week. Am I off track here folks? Then need to figger the concequences of the Gulf oil spill on East Coast weather this winter. I do not expect oil on Cape Cod, buy the ocean currents may be slowed, allowing trapped heat to disipate along the Southern States, & be depleted by the time it reaches Virginia & North. UIL = 7% dividend at my cost basis. Ideas on weather projections?

  • brosm08 on 6 August 2012

    Interesting comments on TOT below, especially about recovery of the 25% withholding-that is a killer that has dropped my calculated yield to 3.5%. Why do the talking heads not qualify these foreign yields with WH rates? I had divs of $256 in Jan 12, 242, April 12, 230 in july 12, so quarterly divs that appear to be dropping.

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