You know the world is within trouble when investors look to the oil industry for safety.
Oil stocks, the worst performing shares in the world, are starting to lure investors, with dividend yields the greatest since the financial crisis that began in 2008.
Their payouts tend to be more remarkable within this era of record-low interest on cash and zero to negative yields on government bonds. Chaos in Greece and tanking Chinese markets only add to investor losses, using more than $3 trillion wiped off global equities in the past month.
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Royal Dutch Shell Plc\’s dividend offers 6.7 percent on shareholders\’ cash, an interest rate not seen since the global financial meltdown and almost double the amount average for London\’s FTSE-100 stock index. Morgan Stanley says the extra yield offered by oil companies within the equity market is the most in 3 decades.
\”Undervalued share prices, continuous high dividend: It is a good time for investors to get involved with the oil companies,\” Richard Hulf, co-manager working in london of Artemis Global Energy Fund, part of a group overseeing $32 billion for investors, said June 30.
With Europe at the center of the global economic malaise, lending to Germany for Ten years gets you less than 1 percent. In contrast, Exxon Mobil Corp. has a dividend yield of three.5 percent, the highest since 1996. BP Plc and Chevron Corp. offer rates of 6.8 percent and 4.Five percent, respectively.
\”Top investors are purchasing Big Oil as a proxy to a bond,\” said Norbert Ruecker, commodities research chief at Bank Julius Baer & Co. in Zurich.
Oil companies\’ share prices, the denominator to the dividend numerator, have collapsed. Energy companies on the benchmark MSCI All-Country World Index of worldwide stocks have sunk 7.1 percent this year, the worst performance of any industry.
Crude oil prices have fallen by almost half in a year, using the world on the point of the longest-lasting glut in a minimum of three decades. That cut earnings, with median net income among 15 from the largest integrated oil companies down 45 percent in the first quarter from a year earlier. The knock-on effects include producers\’ shrinking spending on the biggest projects and on exploration which will secure future income.