Stock Analysis on Net
Stock Analysis on Net

Occidental Petroleum Corp. (NYSE:OXY)

Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

Intrinsic Stock Value (Valuation Summary)

Occidental Petroleum Corp., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 19.14%
0 DPS01 0.72
1 DPS1 0.67 = 0.72 × (1 + -7.08%) 0.56
2 DPS2 0.66 = 0.67 × (1 + -0.85%) 0.47
3 DPS3 0.70 = 0.66 × (1 + 5.39%) 0.41
4 DPS4 0.78 = 0.70 × (1 + 11.62%) 0.39
5 DPS5 0.92 = 0.78 × (1 + 17.86%) 0.38
5 Terminal value (TV5) 84.35 = 0.92 × (1 + 17.86%) ÷ (19.14% – 17.86%) 35.14
Intrinsic value of Occidental Petroleum Corp. common stock (per share) $37.35
Current share price $66.04

Based on: 10-K (reporting date: 2023-12-31).

1 DPS0 = Sum of the last year dividends per share of Occidental Petroleum Corp. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.83%
Expected rate of return on market portfolio2 E(RM) 13.48%
Systematic risk of Occidental Petroleum Corp. common stock βOXY 1.65
 
Required rate of return on Occidental Petroleum Corp. common stock3 rOXY 19.14%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rOXY = RF + βOXY [E(RM) – RF]
= 4.83% + 1.65 [13.48% – 4.83%]
= 19.14%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Occidental Petroleum Corp., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividends on common stock 646 485 38 746 2,585
Dividends on preferred stock 736 800 800 400 318
Net income (loss) attributable to Occidental 4,696 13,304 2,322 (14,831) (667)
Net sales 28,257 36,634 25,956 17,809 20,393
Total assets 74,008 72,609 75,036 80,064 109,330
Stockholders’ equity 30,250 30,085 20,327 18,573 34,232
Financial Ratios
Retention rate1 0.84 0.96 0.98 — —
Profit margin2 14.01% 34.13% 5.86% -85.52% -4.83%
Asset turnover3 0.38 0.50 0.35 0.22 0.19
Financial leverage4 2.45 2.41 3.69 4.31 3.19
Averages
Retention rate 0.92
Profit margin -7.27%
Asset turnover 0.33
Financial leverage 3.21
 
Dividend growth rate (g)5 -7.08%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to Occidental – Dividends on common stock – Dividends on preferred stock) ÷ (Net income (loss) attributable to Occidental – Dividends on preferred stock)
= (4,696 – 646 – 736) ÷ (4,696 – 736)
= 0.84

2 Profit margin = 100 × (Net income (loss) attributable to Occidental – Dividends on preferred stock) ÷ Net sales
= 100 × (4,696 – 736) ÷ 28,257
= 14.01%

3 Asset turnover = Net sales ÷ Total assets
= 28,257 ÷ 74,008
= 0.38

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 74,008 ÷ 30,250
= 2.45

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.92 × -7.27% × 0.33 × 3.21
= -7.08%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ($66.04 × 19.14% – $0.72) ÷ ($66.04 + $0.72)
= 17.86%

where:
P0 = current price of share of Occidental Petroleum Corp. common stock
D0 = the last year dividends per share of Occidental Petroleum Corp. common stock
r = required rate of return on Occidental Petroleum Corp. common stock

Dividend growth rate (g) forecast

Occidental Petroleum Corp., H-model

Microsoft Excel
Year Value gt
1 g1 -7.08%
2 g2 -0.85%
3 g3 5.39%
4 g4 11.62%
5 and thereafter g5 17.86%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -7.08% + (17.86% – -7.08%) × (2 – 1) ÷ (5 – 1)
= -0.85%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -7.08% + (17.86% – -7.08%) × (3 – 1) ÷ (5 – 1)
= 5.39%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -7.08% + (17.86% – -7.08%) × (4 – 1) ÷ (5 – 1)
= 11.62%