Monday, January 5, 2015


I've been around long enough to remember when oil was around $30 a barrel and the oil companies still managed to make money.  O.K., so things cost more now days.  But it's still about price and demand.  Once the market sets the price too low, the oil glut will end because producers will cut supply.  Once supply becomes more scarce, prices will go up and hopefully level off where the companies make a profit and consumers still benefit from lower average prices on gasoline.

If you bought oil stocks when prices were high, most likely they don't look so attractive to you now.  Which is why so many investors are headed for the exit with energy stocks.  However, I'm looking at it as an opportunity to take advantage of lower priced stocks to pick up some bargains in the oil business.  While available funds limit the amount I can currently invest, I have put in an order to purchase shares of Pacific Coast Oil Trust (ROYT) as an income investment.  Their current monthly dividend of 5 cents per share works out to a yield of 24.83% on their recent share price of $5.38 per share.  Of course the dividend fluctuates according to earnings and has been adjusted lower of late.  I'm willing to take the risk that they'll be able to maintain a reasonable dividend payout even with lower oil prices and with the price per share being so low, I could possibly see some growth as oil prices level off or go back up.

There's always the possibility I could lose my shirt on this deal, but it will only be a small percentage of my overall portfolio, so I'm willing to accept the risk.  I'll keep readers posted on how it works out.

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