Conoco stock costs only 12.6 times earnings and pays a decent dividend. It’s a good way to play heightened worries about oil supplies.
ConocoPhillips (COP 1.13%) stock is on the rise Friday morning, up 2.5% through 10:55 a.m. ET, on worrisome news from the Middle East.
On Thursday evening, Israeli warplanes struck multiple targets in Iran, resulting in drone strikes from Iran on Israel. Investors are nervous that conflict in the Middle East will threaten the supply of oil from Mideast suppliers, raising oil prices.
Image source: Getty Images.
What this means for oil prices
So far, investors seem to be right about that. According to the latest data from OilPrice.com, WTI crude oil shot up nearly $5 today, the biggest one-day gain since 2022, to $72.70 per barrel. International benchmark Brent Crude is up a similar amount, selling for just under $74 a barrel.
While this might be a blip, it’s a big one. And my hunch is it’s not a temporary adjustment, as the conflict between Israel and Iran is likely to get worse before it gets better, and could even draw in neighboring countries, affecting oil supplies from the broader region.
Is ConocoPhillips stock a buy?
From an investors’ perspective, of course, these kinds of worries do encourage a focus on oil stocks, which may benefit as oil prices rise, and oil profits increase. In the case of Conoco, we’re looking at a global giant that earned $9.2 billion in profit last year even before prices began rising, and that trades for only about 12.6 times trailing earnings today
With a 3.3% dividend yield, the stock should perform well so long as Conoco can maintain a 10% or better earnings growth rate. Mideast tensions should help make that more likely, and lift the stock past analyst forecasts for 7% long-term earnings growth.
All things considered, I think Conoco stock looks like a reasonable way to play the situation.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
