One Of My Top Oil & Gas Picks Is Up 263%, And I’m Taking Some Profits…

Over at High-Yield Investing, it’s one of the biggest winners we’ve had in years.

And now, it’s time to take some profits off of the table. Not because I’m bearish on the company, necessarily… But in this market, with uncertainty and volatility are both high, I don’t want to see our profits evaporate.

Let me explain…

If you’ve been following along for a while, then you know I’ve been bullish on the oil & gas sector dating back to the onset of the Covid pandemic.

I initially recommended ConocoPhillips (NYSE: COP) to my premium subscribers during the depths of the Covid lockdowns a little over two years ago. The shares, which were trading in the mid-twenties at the time, have ridden the sharp rebound in crude prices — quadrupling to a recent peak of $107.

I’ve also mentioned COP several times to my non-premium readers. I first used it as an example of why it often pays to zig when everyone else is zagging. Remember, oil prices dipped into negative territory back then… But I’ve also cited it several times since then when explaining my overall bullishness on energy.

Regardless, our timing on this pick was perfect.

Along the way, we have collected a nice pile of dividends as well.

ConocoPhillips brings nearly 2 million barrels of oil to market daily, and it can afford to be far more generous at today’s lofty triple-digit prices. Hence the decision to add a second tier of distributions that reflects current conditions. (I discussed this policy here in some detail.)

The company has committed to returning $600 million in quarterly “base” dividends, which works out to $0.46 per share. This amount can be comfortably met even when oil prices soften and shouldn’t need to be adjusted except in extreme circumstances. In fact, that $600 million outlay took up less than 10% of last quarter’s $7.0 billion in operating cash flows.

As explained back in February, management aims to return 30% of cash flows. The remainder will come in the form of a variable dividend component, complemented by share repurchases.

When the plan was first announced, the initial variable dividend was set at $1 billion, or $0.20 per share quarterly. A few months later, it was raised by half to $0.30 per share. And now, get ready for more.

The next variable dividend will more than double to $0.70 per share. At the current pace, we can expect eight dividends (4 regular and 4 variable) over the next 12 months totaling $4.64 per share – for a solid yield of 4.6%.

Action to Take

COP delivered a massive first-quarter profit of $4.3 billion, more than four times what it earned a year ago. Of course, oil prices are cyclical, and rising interest rates could pinch global demand.

Still, for now, management expects to return $10 billion to shareholders this year through its triple mandate, $2 billion more than it was targeting just a few months ago. Meanwhile, the company is also busy eliminating debt and integrating newly-acquired Permian Basin assets that have yielded economical new drilling targets.

That being said, I recently told my premium subscribers that I think the time has come to take some gains off the table.

We didn’t sell out of our entire position – after all, with oil prices still in triple-digit territory, COP could still have more room to run. But I think it would be prudent to cash out, say, half of your position if you followed along with us on this one.

I realize that conditions seem close to perfect for COP, which is why we’re not selling out completely. It has been (and remains) one of our biggest winners over at High-Yield Investing.

The problem is that the rest of the market is far from perfect right now. And it would be a shame to see a chunk of those gains evaporate simply because the market is uncooperative.

Editor’s Note: If you’re looking for a way to earn higher yields in this low-rate market, then you should check out my latest research over at High-Yield Investing.

In it, you’ll find 5 “Bulletproof Buys” that have weathered every dip and crash over the last 20 years and STILL hand out massive gains to investors.

With picks like this, you can “keep it simple”… In fact, you may never have to worry about what the market is doing again!

To learn more, go here.