Crude oil, and as a result the energy sector, surged yesterday in response to attacks in Saudi Arabia which has damaged the country’s oil production. Crude rose over 14% while the Energy sector (XLE) rose 3.36%. Taking a more granular look at the sector, S&P 500 stocks across the GICS Level 4 sub-industries saw varied responses to the news. Drilling in addition to Exploration and Production companies were up the most, rising 14.3% and 7% respectively, while the Refining and Marketing industry, although still higher, only rose around 14 bps. Although this sub-industry did not explode higher on this news, Phillips 66 (PSX) in particular is looking attractive. Not only is the company’s 9.4 P/E below the median for the sub-industry (12.2) and sector (13.6), but PSX is also eyeing a nice technical breakout. Mid-summer and again in the past few weeks, PSX has stopped short of resistance around $105 which can be traced back to a short rally at the end of last year. in the past couple of days, it has come back up to these levels after putting in a higher low at the end of August.
Even as the stock looks to breakout, at 3.5%, the current dividend yield is still near its highest level since PSX first began paying a dividend in 2012. This yield is also higher than the yield on the average S&P 500 energy stock which is currently at 3.05%. This dividend has been steadily growing at a rate of 13.8% over the past five years. The company has continued room to grow this dividend as the payout ratio is only at 28.67% and debt to equity only sits at 46.59%. For comparison, the average of these two ratios for all S&P 500 energy stocks is 73.64% and 58.4%, respectively. In other words, in addition to having technicals and valuation with potential, PSX also has a safe and sizable dividend to boot. Start a two-week free trial to one of our premium membership options to receive Bespoke’s most actionable stock market research.