stock of the week chrd

Dividend Stock of the Month: CHRD

An Under-the-Radar Oil Stock With Crazy Cash Flow

If you’ve been reading Rise & Hedge for a while, you know we like high-yield investments and strategies. Whether that entails writing about dividend snowballs, dividend ETFs, 5% CDs, REITs or Dividend Kings and Aristocrats … 

We. Love. Yield. 

Today’s recommendation — Chord Energy (CHRD) — fits the bill. The $7.53 billion energy company is our dividend stock of the month. But it’s not just the yield that caught our attention. 

TL;DR

It’s earnings season again, which is a good time to rebalance your portfolios. We’re watching Chord Energy this month, a hydrocarbon exploration and extraction company with a strong dividend and eye-catching cash flow.

Some Background

If you recall from our issue, “Big Oil’s Big Comeback,” there are three phases of oil and gas production: 

  1. Upstream: Exploration and retrieval of oil or natural gas, entailing geologic surveys, well drilling and the extraction of natural resources. 
  2. Midstream: Transportation and storage of crude products, including pipelines, pumping stations, tanker trucks, rail transport and ocean shipping vessels. 
  3. Downstream: Refining crude fossil fuels into finished products like gasoline, diesel, kerosene, jet fuel, heating oils, asphalt, rubbers, fertilizers, preservatives, plastics and pharmaceuticals (yes, 99% of medicines contain petrochemicals). 

Chord Energy is an upstream, mid-cap company that specializes in hydrocarbon exploration and hydraulic fracturing (i.e., fracking). Founded in 2007, Chord went public in 2010, raised $400 million and is now one of the top producers in the Williston Basin, home to 4.3 billion barrels of oil and 4.9 trillion cubic feet of gas.

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According to its website, the company “acquires, exploits, develops, and explores for crude oil, natural gas, and natural gas liquids” that are sold to a diverse network of refiners. 

And while Chord may not be a household name, it’s the premier producer in the Williston Basin, extracting more crude in that area than operators like Hess, ConocoPhillips and ExxonMobil:

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With the U.S. positioned to maintain its rank as the world’s largest oil producer — a title it’s held since 2018 — domestic producers like CHRD are poised to profit. 

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Strong Fundamentals

While we love yield, we really love strong fundamentals. Chord Energy saw its total assets grow from $2.1 billion in 2020 to $6.9 billion in 2023 … a 228% increase. Meanwhile, it lowered its total liabilities from $1.9 billion in 2022 to $1.8 billion in 2023. 

Its revenue has also been steadily climbing: 

  • 2020: $1.08 billion 
  • 2021: $1.57 billion 
  • 2022: $3.64 billion 
  • 2023: $3.89 billion 

The result? Since 2021, CHRD’s gross profit surged from $670.08 million to $1.43 billion in 2023, good for a 113% increase. The story’s the same for net profit, which rose from $188.96 million in 2021 to $1.02 billion in 2023 … a 439% gain.

Explosive Cash Flow Growth

Profit aside, cash flow is often more indicative of a company’s financial wellbeing. While income statements can be manipulated through financing, depreciation and amortization, cash flow statements are straightforward and report the company’s cash on hand. 

And Chord Energy is a cash flow king. Its net operating cash flow since 2019:

  • 2019: $892.85 million 
  • 2020: $290.93 million
  • 2021: $914.14 million
  • 2022: $1.92 billion
  • 2023: $1.82 billion

Another reason cash flow is important? It’s where dividends come from. 

Institutional Investors LOVE This Stock

On average, institutional investors (e.g., hedge funds, mutual funds, endowments, etc.) hold 60% of any given stock’s outstanding shares. 

With Chord Energy, institutional investors own 98% of shares. The largest holder is Blackrock (5.17 million shares worth $932 million) followed by Vanguard (4.34 million shares valued at $799 million). 

That combined with strong cash flow and revenue growth have likely contributed to Wall Street Journal analysts giving the stock a one-year median price target of $207.50 and a high-end one-year price target of $224. Shares are currently trading for $181, meaning there’s upside potential of 23.75% over the next 12 months. 

Growth + Yield = 🤤

CHRD’s forward dividend yield is 2.72%, which equates to $1.23/share quarterly. And while 2.72% might not make headlines, the stock’s enjoyed strong growth that’s helped increase quarterly distributions. 

So far this year, shares are up 7.64%. Over the past year, they’re up 25.76%. Going back five years, investors have seen a 484.26% return

Its current price-to-earnings (P/E) ratio is 7.70. The average S&P 500 P/E ratio is 25 … meaning CHRD is considered cheap as investors are spending less money for each dollar of earnings the stock generates.

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