Total Plc is one of the companies under the Petroleum (Marketing) Sector of the NSE. I have never had any interest in that particular sector because I consider them as stocks for the rich and old people who can afford to buy thousands of units at once. I’d rather go for stocks that I can afford to buy thousands of it at a time. It makes me happy when I check my CSCS account and see stocks in the thousands of units. I know, I know, it is a mundane reason. But then we are entitled to be irrational once in a while.
Total and one of its other counterparts, Mobil Plc, released their results on the floor of the NSE last week, which has had an impact on the stock prices since then because of the declaration of huge dividends, which of course has been a yearly occurrence. Although Mobil has declared twin benefits declaration for dividends and bonuses, I have decided to focus my laser on Total because I fuel my car in one of their filling stations here. I want to know what they have done with my money.
Total increased their turnover, for the period ended December 2007, from N126.57 billion in 2006 to N137.33 billion in 2007, which was a mere 8.5% increase. Profit before tax was up 48.77 percent, from N3.24 billion in 2006 to N4.82 billion in 2007. After tax profit was 29.48 percent higher, from N2.51 billion in 2006 to N3.25 billion in 2007. The company, predicated on the above result has decided to pay a dividend of N6.40 per share to all shareholders whose names appear on the company register by April 28, 2008. Payment date has been fixed for June 8, 2008.
The results show that Total has developed a way to manage cost of sales based on the sharp increase in PBT relative to the turnover, which I believe is good for business but they seem to have paid more in taxes in 2007 than in 2006. This is a typical blue chip stock that has established itself in the market because of the high dividend they can afford to pay. The dividend of N6.40 per share is just about 2.5% of its market price which is not too encouraging for me, anyway. Personally I will not buy Total eight now if I am only interested in the dividends.
Let’s take a look at the general analysis, from where I will be able to draw a conclusion if Total is going to be a good buy or not at the current price of N251.98. The earning per share is currently N9.56 based on 340 million shares which means that the price earning ratio is currently 26.36 and is already trading at its fair value. It still has the potential of getting to around N286.78, which will equate to a capital gain of about 13.8%, which is not too bad for the short term especially when you add the dividends.
Total is paying 67% of its net profits as dividends, which means that it is not a company that will need to raise money from the market for anything except they really want to carry out some very massive project. I hope some of these penny stocks on the floor will be able to reach this kind of stage, where they will be able to fit the bill of blue chip stocks and by then I will be able to buy them in millions too.
I guess Total has done well with my money if everything is taken into consideration and it will continue to be a good stock to purchase in the long run; for those who can afford to buy the stock in thousands.