ConocoPhillips (COP) to Buy Back Shares and Increase Dividends

Energy giant ConocoPhillips (COP), which trades on a 4% dividend yield, is looking to increase dividends and buy back shares after selling a stake in a Russian rival.

The energy sector is bouncing back and this is reflected in the strong earnings delivered by energy giant ConocoPhillips (COP) when it reported for the second quarter of 2010.
 
The company delivered earnings of $4.2 billion or $2.77 per share for the quarter on the back of a series of divestments from non-core assets and an improvement in the operating environment. The company currently trades on a dividend yield of 4%.
 
ConocoPhillips (COP) is the third-largest energy company in the United States, based on market capitalization as well as oil and natural gas reserves. With operations in more that 30 countries and roughly 29,000 people, the company is one of the most recognized global names in the energy sector.
 
The company was formed in 2002 following the mergers of Conoco (founded in 1875) and the Phillips Petroleum Company (1905) and the business was expanded in 2006 following a merger with Burlington Resources.
 
Apart from a handy dividend yield of 4% the company trades on what would appear to be a very attractive 9 times forward earnings. This fact has not escaped management who indicate that they see value in the ConocoPhillips (COP) stock price at present levels, particularly following the sale of its stake in Russian oil firm LUKOIL (LUKOY).
 
ConocoPhillips (COP) and LUKOIL (LUKOY) have reached an agreement under which approximately 64.6 million Russian registered shares will be purchased by LUKOIL (LUKOY) for $3.44 billion. This will provide the company with the opportunity to return some cash to shareholders.
 
The company is very clear about the cash realization from the disposal, stating, "Our experience with LUKOIL (LUKOY) and the Russian authorities has been positive, and we look forward to a productive relationship in the future. However, given the expected business environment and our stated strategy to enhance returns and increase distributions, we have made the decision to sell our entire stake in LUKOIL (LUKOY). We expect to accomplish this by the end of 2011, with the proceeds used primarily to repurchase ConocoPhillips (COP) shares."
 
Quality oil and energy assets are likely to be key beneficiaries of the economic recovery and coupled with their dividend yield they make for an important industrial component of investor portfolios. With ConocoPhillips' (COP) stated intention of realizing value for shareholders, this company may be a great opportunity for conservative investors seeking opportunities to unlock value.

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