ConocoPhillips (NYSE: COP) stock price extended the downside amid trader’s worries over the declining oil prices. Concerns over the slowing oil demand due to the spread of coronavirus in China have significantly impacted the performance of the energy sector in the last couple of days. Investors fear the latest virus attack could repeat the memories of the 2002-03 SARS epidemic, which led to a slump in travel.
Oil prices lost more than 6% of value in the last few days. Market analysts are seeing further downside if the crisis develops. On the other hand, ConocoPhillip’s stock price also lost significant value this month, driven by a huge drop in oil prices. The COP share price plunged 4.5% since the beginning of this year.
Buy ConocoPhillips Stock on Dip
COP is among the top names in the energy sector. The company is famous for offering solid dividend growth. Therefore, the market pundits are seeing the share price selloff as a buying opportunity for new investors. This is because ConocoPhillips has strong future fundamentals. The largest U.S. exploration & production company has the potential to generate positive free cash flows around $40 a barrel.
“COP has a very strong plan going into the next decade where they’re going to attempt to generate $50B of free cash flow, they’re going to do a lot of asset sales and just essentially rationalize their operations all across the board,” BK Asset Management’s Schlossberg says.
Free Cash Flow Generation Potential Makes it a Good Play for Dividend Investors
The company appears in a strong position to generate cash returns for investors. This is because of its cash generation potential. ConocoPhillips has recently increased its quarterly dividend by 37% to $0.42 per share. In addition, the company plans to repurchase $3 billion of common stock in the following quarters. COP plans to generate $50 billion in free cash flows in the next ten years, which bodes well for its dividend growth strategy.