China Petroleum & Chemical Corp. (SNP), also known as Sinopec Corp, is headquartered in Beijing, China. It is China's largest manufacturer and supplier of petroleum and major petrochemical products.
SNP is a Dividend Challenger with a modest 5-year streak of dividend increases. It pays semi-annual dividends, usually in June and September. As is the case with several semi-annual dividend payers, SNP has a pattern of paying one larger dividend and one smaller dividend every year. The pattern of payments since 2010 looks like this:
( $1.099 $0.802 ) ( $1.367 $1.066 ) ( $2.193 $1.075 ) ( $2.222 $1.293 )Dividend payments of $3.515 at a buy price of $80.61 represents a starting Yield on Cost of 4.36%.
With growth of 241% over the last 10 years, SNP easily outpaced the S&P 500's growth of 69%:
SNP's earnings per share has moved mostly upwards, with the exception of a noticeable dip in 2008. Dividend growth shows a similar pattern, except that the dip occurred in 2009:
Analysis of SNP
Fair value estimates for SNP range from $91.00 (MorningStar) to $129.98 (Graham Number), with a median of $91.43. Compared with the median, SNP is discounted by about 19.31%.
The following table provides some key statistics for SNP:
- 7-year weighted average dividend growth rate is 21.88% (at least 7%)
- Forward P/E ratio is 6.93 and the trailing twelve month (TTM) P/E ratio is 8.47 (below 16)
- Dividend payout ratio is 41.66% (below 65%)
- Estimated 5-year total payback percentage is 26.88% (at least 16%)
SNP appears in my October dashboard as a 6-star stock: (*******)
Other ratings for SNP
SNP is attractive because it offers a solid dividend yield and a stellar dividend growth rate.
As one of the two integrated oil companies in China, SNP is well-positioned to capitalize on the increased demand for energy in China. Also, SNP's downstream operations, including refineries, are benefitting from strong growth in China's middle class and an increase in automobile ownership. SNP's natural gas business should grow significantly in the coming years. The company is concentrating on building-up production capacity, improving operational organization and growing natural gas output.
One concern is SNP's maturing domestic oil fields and the associated rising costs when production declines become pricier to counterbalance. Attempts to expand operations offshore and to international markets have been too slow to claim meaningful progress. Compared with the average western integrated oil company, SNP is significantly downstream weighted. It does not have an asset structure that balances risk and return in the same way as its western counterparts. Also, to control inflation, the Chinese government plays a major role in the pricing of refined products, which limits SNP's profitability.
Because SNP usually pays dividends in June and September, I'll have to wait a long time for SNP's first dividend payment. Nevertheless, I feel the discounted price and growth prospects warrant my investment at this time.
31 shares of SNP represent $108.70 of expected annual dividend income, which increases DivGro's projected annual dividend income to $1,966.76.
SNP is the 17th dividend stock purchase for DivGro.
Full Disclosure: Long SNP