Why Ecopetrol’s Earnings and 22% Dividend Yield Makes It a Bargain

Ecopetrol's Earnings

Ecopetrol SA (NYE:EC), the state-operated oil company of Colombia, has announced record Q4 and full-year 2022 results, with a 22% dividend increase. Despite this, shares are down from previous years, likely due to the election of a socialist president who campaigned on environmental aims, causing foreign investors to perceive that businesses with a carbon footprint will suffer. However, Ecopetrol owns a large array of businesses outside of upstream oil production, including renewables, toll roads, and an electric grid, which all hold their value regardless of the government’s view towards new oil production licenses. The government also owns 88% of Ecopetrol and is unlikely to reduce its ability to produce more oil, as it would reduce the dividends it receives. At a P/E ratio of 3.3x, investors who buy shares now will be rewarded by the company’s undervalued assets and 22% dividend yield.

Another factor contributing to the undervaluation of Ecopetrol is the recent decline in oil prices. As oil prices dropped in late 2018 and early 2019, Ecopetrol’s stock price fell with them. Despite the fact that oil prices have since rebounded, Ecopetrol’s stock price has not recovered to pre-drop levels. This creates an opportunity for investors to buy a quality company at a discount.

Ecopetrol is a diversified Colombian company with strong assets in oil, refining, infrastructure, and renewables. It is undervalued due to concerns over the new socialist government’s stance on extractive industries, as well as the recent decline in oil prices. However, with a P/E ratio of just 3.3x earnings and a dividend yield of 22%, it presents an excellent buying opportunity for investors willing to take a long-term view.

Ecopetrol SA Stock Analysis

According to 3 analysts’ forecasts, the average target price for Ecopetrol SA ADR stock over the next 12 months is USD 12.60, with a Buy rating from the analysts. Stock Target Advisor’s analysis on the company’s stock is Slightly Bullish, based on 9 positive signals and 7 negative signals. The current stock price of Ecopetrol SA ADR is USD 11.09, with a +6.63% change over the past week, -1.68% over the past month, and -31.42% over the last year.

Company Overview

Ecopetrol S.A. is an integrated energy company that operates in four segments: Exploration and Production, Transport and Logistics, Refining, Petrochemical and Biofuels, and Electric Power Transmission and Toll Roads Concessions. It engages in oil and gas exploration and production, crude oil transportation, processing and refining, distribution of natural gas and LPG, sale of refined and petrochemical products, and energy infrastructure projects. It also offers industrial service sales and management services. Ecopetrol S.A. has operations in various regions globally and was incorporated in 1948 in Bogotá, Colombia.

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