Income · Stocks to Consider and Updates

Total Beats Estimates; Hikes Dividend

French energy giant Total SA (NYSE: TOT- $52.70) reported a slump in third-quarter earnings due to a plunge in oil and natural gas prices but a surge in production in the period helped beat sales and profit forecasts. Revenue from sales at the Paris-based company dropped to $42.54 billion for the period from $48.4 billion a year ago but was still ahead of the $36.98 billion average analyst estimate. Adjusted earnings per share also plunged to $1.13 from $3.20 a year earlier, but net income was still above the $1.01 Street view. The shortfall in the results was largely due to the decline in Brent crude oil prices, which were 18% lower from a year ago. European natural gas prices dropped even more, down 54% over the prior-year period. Year-to-date cash flow from the integrated gas, renewables, and power segment increased by nearly $1 billion, driven by liquefied natural gas growth of 55%. 

       Looking ahead, the company said production growth should reach 9% by the end of this year thanks to ramp-ups on projects started in 2018 and start-ups since the beginning of the year, including Angola, the UK North Sea, Norway and Brazil. The company is continuing with a cost-cutting program, with cumulative savings expected to hit more than $4.7 billion by the end of 2019. Total also plans to press ahead with a $5 billion asset-sale program over 2019-20, with its net investments in the current year projected to be below $18 billion.

       Given the stronger visibility of Total’s future, the Board of Directors decided to accelerate dividend growth over the coming years. It has guided toward a 5% to 6% increase in the annual payout and declared the equivalent of $0.76 per share beginning in the third quarter up from $0.72 and will yield 5.7% annually. Income investors with a long-term holding period would do well to have a look here. TOT ADRs are currently trading at about 12 times full-year earnings, thus providing for decent total returns over the next few years.

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