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Energy

Total SA (ADR) (TOT): A Lucrative Investment?

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For income savvy investors, the lucrative dividend yield of 5.33% certainly seems appealing, and is fairly in line with its peers in the industry

We continue to maintain our optimism oi Total SA (ADR) (NYSE:TOT) with many reasons to remain bullish and hold investments.

For income savvy investors, the lucrative dividend yield of 5.33% certainly seems appealing, and is fairly in line with its peers in the industry. Also, the financial health of Total’s balance sheet is fairly good, with a debt load of around $44.45 billion and reserves of cash amounting to $24.8 billion.

Its net debt to equity ratio amounts to 31% which seems pretty much manageable considering improvements in the oil markets. Also, the company’s vertically integrated model has helped it survive the downturn in the oil markets with subtle ease.

What’s really appealing for Total is its Solid Production profile which is in the growth phase. This year, the company bought around five major projects which included one in Kashagan field in the Caspian Sea in August, and one in Bolivia named Incahuasi gas field in October.

As per the company, it has 10 main projects from 2014-2020 which are expected to bolster company’s production growth by around 5%. With oil prices at higher levels compared to what they were at the year’s start, the profitability from the additional production would be much better too.

The company also attained its target of lowering operational expenditure by $1.2 billion, reporting savings of around $1.5 billion. This year too, the company presented its target to save more than $2.4 billion, while the company is marching towards reducing its costs by over $2.7 billion. It further expects savings to reach to $4 billion by next year.

Furthermore, its Capital Expenditure is also expected to lower from $18.5 billion this year, to the range of $15-$17 billion until 2019. This is because many of its projects are edging completion, and also require lower capital expenses going forward. This could have a profound impact on its cash flows.

The improvement in oil prices also seem to be a tailwind for the stock, and we believe it provides lucrative value for investment.

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