Pfizer (NYSE: PFE) one of the largest drug manufacturers in the world, and with a partner BioNTech and competitive Moderna, is one of the first companies to cross the finish line in the race to develop the COVID-19 vaccine. It has also built its share for 10 consecutive years, and at current share prices, its payout rate yields a staggering 4%.
In short, Pfizer may be one of the best COVID vaccine stocks – but not the best stock of stocks. In my opinion, Honeywell International (NYSE: HON)and Chevron (NYSE: CVX)there are better choices for investors looking for a steady income from quality companies.
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Honeywell
Honeywell is a multifaceted business tool and its products fill the gap between the physical world and the digital world. He embraces the transition from business manufacturing to business connectivity, and is the leader of the business internet of things (IIoT) and software as a service (SaaS) for business companies.
The company had a good second quarter and a strong third quarter. It goes back nicely from a pandemic slowdown. Its free cash flow (FCF) remains strong, and after some have gone to share payments, the remainder can be used to pay off debt, buy back shares, or more invest in the industry. Management is optimistic that the company will return to marginal growth and expansion next year.
Honeywell’s history of performance and growth is impressive, but what really leaves him in balance.
HON Net Long Term Total Debt (quarterly) with YCharts
Despite being the leading U.S. business company with market capitalization, it has the lowest net long-term debt out of the top 10 U.S. businesses. That low debt is Honeywell’s last ace in the hole. The strength of its balance allows the company to acquire property in a timely manner in difficult times, continue to invest while others scale back, and grow its share while others lose. cut their own.
Chevron
Investors may be keeping an eye on large oil stocks in today’s market. But Chevron is one of the best-run integrated oil and natural gas companies. At normal share prices, its share yield is 5.8%. Also, with 32 consecutive years of pay rise, the Loyalty Artists list has a prominent place.
The COVID-19 outbreak has affected oil and gas demand, leading to short-term overcapacity and lower commodity prices. In response, Chevron cut spending and selectively reduced output. The result is that Chevron expects to end 2020 with spending well below its original capital budget of around $ 20 billion. That was right around what it cost in 2019. As in its most recent quarter, it is expected to be completed closer to $ 14 billion this year. These spending cuts have helped Chevron reduce losses and limit the use of debt.
Even with that reduced capital cost, Chevron found a creative way to grow its long-term prospects. Bought it Noble power for $ 13 billion, which is like a bargain price because of its asset portfolio. Noble is a major player in the Permian Pool, the largest land-based oil field in the U.S. and Chevron’s main long-term growth driver. That contract closed in October.
Management plans on further cost reductions in 2021, leading to a $ 14 billion capital budget that incorporates previous Noble work. Of that amount, Chevron estimates that it needs to spend about $ 10 billion annually to maintain its production. Noble needs about $ 800 million. This means that there will be significant spending (even at this reduced rate) leading to long-term investments. Looking back over the past five years, the progress Chevron has made in reducing costs while maintaining a healthy level of FCF is impressive.
CVX Capital Expenditure Data (quarterly) by YCharts
If FCF is too low, a company can cut the allowance or tap into their savings to fund the payment. But that’s a slippery slope because it can put a company’s finances on darker ground. This is exactly what has happened to many of Chevron’s peers, which is one reason why Chevron has the best balance sheet in its group. By permission, Chevron’s debt burden has gone up as a result of Noble’s build, but it’s still at a healthy level.
Dynamic duo
Honeywell’s growth prospects, employment stability, safe separation and growth, and financial health make it a key business stock for long-term investors. Chevron is similar in that it is possible to argue the optimal balance of the oil majors. And while Chevron’s earnings have suffered a major blow this year, the cost reductions and periodic investments are a sign that it is doing its best to lead a challenging market.
Honeywell has a share yield of 1.8% compared to Chevron’s 5.8%, which makes sense as Honeywell is the safer of the two. Investors should choose which company best suits their risk tolerance, but both are good stock stocks to buy now.