I've already shared two videos on investing in the oil industry.

The first video did an overview of all the lessons I've learned over the years investing in oil stocks.

The second video shared one of my positions that I own that really broke.

Ah, lot of the rules that I typically try to follow as an investor.

And that stock, by the way, is BP.

And today, by popular demand, I have one subscriber in particular who has been reaching out, asking me, Hey, e.

And when it's part three of your oil, Siri is gonna come out.

I've been waiting.

I'm really interested in these oil stocks.

Well, I'm finally doing that video, and so I'm gonna share the other two oil stocks that I own today.

These air new stocks that I have never shared on my channel before, and the 1st 1 is Chevron Ticker symbol C v X, and the 2nd 1 is Royal Dutch Shell Ticker symbol RD s A.

So let's get started.

Could be a fun day of dividend stock investing.

So welcome to the video, everyone.

I want to do a quick overview of the three oil stocks that I own.

I want to share the reasons that I own each particular oil stock Men at a meta level frame.

How I think about investing in oil companies in my personal stock portfolio at a high level before even get into the oil stocks.

One point that is so important is, unfortunately, this industry is prone.

Thio to disaster.

Unfortunately, there was a tragic event with one of my holdings.

BP. 00:01:57.770 --> 00:02:1.700 This is before I owned the stock, actually, but there was an oil spill. 00:02:1.700 --> 00:02:8.000 It was an oil issue with the deepwater horizon, Deepwater horizon rig. 00:02:8.070 --> 00:02:15.740 And so when these disasters tend to strike, it can create obviously a lot of trouble, a lot of havoc out there.

They're very tragic, unfortunate events, but also, from a stock investing standpoint, they can create a lot of risk.

And so overall oil stocks actually are not a huge percentage of my total portfolio by dollar amounts.

They represent 5.5% of my portfolio.

But of the 5.5% that I have allocated for oil stocks, do I put them all in one oil stock note?

That would be too much concentration of risk.

In my personal opinion, this is an industry that totally Warren's intra industry diversification.

And that's why I have spread my risk across three oil stocks.

And so we'll get into old three of them today.

So 1st 1 is Chevron. 00:02:58.710 --> 00:03:1.490 This is actually the first oil stock that I purchased. 00:03:1.490 --> 00:03:9.400 And when I look at things in retrospect right now, if I could only own one oil stock if you just told me Hey, Ian, you can't diversify. 00:03:9.400 --> 00:03:10.960 You're not allowed to diverse five.

Like I said, I like to diversify in this industry because it is prone to some turbulence over the long term.

That being said, if someone said, Ian, you can absolutely not diversify the one oil stock that I would likely buy and hold forever is Chevron.

So this is the 1st 1 that I bought.

This is my favorite oil stock.

We'll get into some of those points in a minute.

Why I like this company so much when, um, the price of oil tank, you may remember from my video if you have not seen it yet.

A link in the description below the price of oil tanked a few years ago.

It actually hit a low of $35.

This is because OPEC had flooded the market with with oil. 00:03:54.200 --> 00:04:3.980 They had up to their production levels, and the reason that they did this is they wanted to fend off competition from some of the United States based oil fracking companies. 00:04:3.980 --> 00:04:5.690 And so they drove the purpose. 00:04:5.690 --> 00:04:13.320 The price of oil down purposefully to try to push off competition in the price of oil fell to $35.

And this is just a few years ago.

And at those prices, obviously the oil companies all on tanked and share price.

And for me, I like to being that oil is very cyclical, being that it's an industry that has its ups and downs being.

It's an industry that carries a lot of risk.

I personally have chosen to focus on the oil super major So that's what these companies are that I own.

They're considered super majors.

They're large diversified oil companies, really large mega cap oil companies.

Anyways, the price of oil has now recovered.

This is Brent crude.

As of today, we're in October of 2018.

It's at $75.

So the price of oil has certainly recovered from its low. 00:04:57.420 --> 00:05:3.430 And what I've what I've learned over the course of the years investing in oil is it is just so highly cyclical. 00:05:3.430 --> 00:05:10.810 And I'm to show that in as an example from my own stock portfolio right now in the various purchase prices that I've experienced over time.

So my best purchase price on Chevron September of 2015 was $76.62.

By contrast, the worst purchase price that I had This is when I paid ah lot more for Chevron.

In years past, I bought it for $126.9.

This was in May of 2013.

Right now the price of Chevron is $110.

And so obviously over the years, the stock prices fluctuated and it's mainly been because the price of oil has fluctuated.

So much oil is a commodity.

At the end of the day, it's a commodity.

Unlike some of the consumer, non cyclical companies that I own, there's not really a competitive mode in terms of brand. 00:05:56.950 --> 00:06:1.640 Maybe there is that the final at the pump, there's some some differentiation. 00:06:1.640 --> 00:06:12.010 They're quite frankly, I like Chevron because I believe, based on their branding and based on wisdom, that's been passed to me from one of my childhood friends who is very into cars.

That a chevron with tech Ron that is the best quality oil or gasoline for one's vehicle.

So if one has a vehicle that they cherish that they want it to last a long time, they take good care of their car like I do.

I wash my own car myself.

I take great pride in it.

I never take it through the car wash because I don't want them to scratch it.

Anyways.

I have been led to believe at least that Chevron is the best quality gasoline.

So certainly there's some branding at the pump in some differentiation.

But at the end of the day, for I am a corner case for most consumers.

They're shopping for oil on price, gasoline on price.

And so this is a commodity.

There's really no competitive mode. 00:06:55.450 --> 00:07:0.360 And so the stocks go up and down and fluctuate as it pertains to the price of oil. 00:07:0.430 --> 00:07:9.570 Now, I would say the strongest oil companies, what they've done is they have got in their cost of production to the lowest possible mark. 00:07:9.580 --> 00:07:17.410 The lower the cost of production, the lower it cost to extract oil from the earth, the better their competitive mode is.

Anyways, you can see here these are just some wild swings.

Just ah, really, Just over two years later, it went from 126 down to 76.

I literally I bought it both of these points and in between as well, and I bought this stock many times have averaged into Chevron over the years, and right now it's at 1 10 And so right off the bat, one of the lessons I have learned is Look, if I was getting started again, I own no oil stocks. 00:07:45.140 --> 00:08:4.560 I personally would probably pick up in oil stock here just because I would want representation in my portfolio I like having representation from most most major sectors, and I like having representation from oil and at 110 versus my price in 2013 of 1 26 That's a reasonable entry point and you'll see more in a minute. 00:08:4.560 --> 00:08:7.110 Why a za function of the dividend yield? 00:08:7.380 --> 00:08:10.440 That being said, it's a far cry from $76.

And so now that I own oil stocks, they're at 5.5% of the portfolio.

I could see oil representing a CZ much a 7%.

I don't want it to be much more than 7% of the portfolio if the price of oil lever goes down.

If these stocks correct in a major way again like Chevron, for example, gets maybe down below $100 it gets into the eighties and nineties, even the seventies, I would add more, and I'd be comfortable bringing my position up a little more.

But at current prices, I'm certainly not adding to these stocks other than reinvesting dividends, and the reason for that is the price of oil has recovered quite a bit and $75.

In the scheme of things that's actually a pretty high point for oil.

If you look at the long, long term oil chart, it's been all over the place and 75 is towards the top and so I just don't know where the price of oil is going to go from here. 00:08:59.820 --> 00:09:5.550 But I certainly don't want to average in and buy more oil stocks here other than reinvesting dividends. 00:09:6.000 --> 00:09:15.500 That being said like like I said, if I had no exposure, I'd probably look at it a little bit differently and the reason being is Chevron's dividend is $4.48 per year.

My yield on cost on my best purchase prices of 5.85% and growing because these guys tend to raise the dividend over time.

They had to stall the dividend increases during the oil crisis a few years ago when the when the price just plummeted.

But they did not cut the dividend and typically these guys raise the dividend over time and they have a really good track record of that and so 5.85 yuan costing my best purchase price.

But that is growing on my worst price.

My Yohan cost is a 3.55%.

So you can see again the discrepancy there, how wild these fluctuations are and how they can affect one's yield on cost. 00:09:57.760 --> 00:10:6.220 The current yield on cost just for someone literally buying today is a 4.4% because it's 4.4 That's a reasonable starting yield. 00:10:6.220 --> 00:10:14.100 And that's why I'm saying, if I had no exposure to oil, I'd probably pick up some Chevron here, a very small position, have some exposure in my portfolio.

And the reason I would do that, hypothetically speaking, too.

Speaking about my personal way, I personally structure my portfolio.

Is the starting yields reasonable?

It's over 4% and it's growing, and certainly oil is not at an all time high.

It's not over $100.

It's at 75.

So there's certainly, you know, it's kind of in the middle.

It's in the middle of the range, and I That's why I like it here now.

What do I like about Chevron?

I like this company because they raise the dividend over time.

This is a dividend growth company.

It's a company that has raised the dividend over time.

It was unfortunate that during the recent oil crisis, the dividend was never cut, but the increases were paused. 00:10:57.220 --> 00:11:2.150 There are certain points when typically in a normal market, they would have increased their dividend. 00:11:2.310 --> 00:11:5.330 They decided, Hey, I'm not gonna increase the dividend. 00:11:5.430 --> 00:11:14.980 I'm just going to keep it the same, keep it the same until some of these some oil price drama blows over and the price of oil gets back to normal ranges.

And so, but needless to say, the dividend growth out of all three is looking forward, in my opinion, is the best great prospects for dividend growth.

And I love cos that grow the dividend because my current yield isn't quite that important.

It's really my yield on cost and looking at yield on cost years out because I'm not using dividends to pay the bills now.

If I was using dividends to pay the bills now, some of my decision would be different.

But because I'm looking at years in the future, I love cos that raise the dividends, and this is one of the great ones that does it in this industry.

So what else?

Stability and quality.

Chevron, out of all three in my opinion is a stable company and a quality company.

It's a premium name. 00:11:56.690 --> 00:12:6.500 It's more of a rock solid company that during turbulent times it's easier to rest assured that the company is not going to face challenges. 00:12:6.640 --> 00:12:16.910 And one of the reasons for that that I want to point out, which is the third reason I like it is the lower amount of debt they have, plus or minus $38 billion in debt.

In terms of scale, you'll see in a minute that their debt of the three is the lowest.

So they have managed their balance sheet really well.

They've kept their debt amounts down.

They've been smart about it, and that's just something I like about Chevron.

They're stable, they're clean, they're rock solid.

And that's why I bought them first.

That's why I love these guys.

It's my my favorite oil company now.

Ah, funny side note.

At one point in my history, I actually did own shares an Exxon Mobil.

I do not own those shares anymore.

The reason that I got rid of Exxon one, it was kind of a smaller position, and I didn't intend to add to it.

And at one point.

I had too many stocks I was up to.

I'd say about 45. 00:12:59.970 --> 00:13:1.930 Along the way, I cut some of them out. 00:13:1.930 --> 00:13:13.080 If I kind of look a Chevron and Exxon as the two kind of gold standards of the oil industry, those air just the two that it's it's really possible to sleep well at night.

Even in this environment where oil in this in his industry, where oil can go up and down quite a bit.

Royal Dutch Shell.

So I own Royal Dutch Shell.

This may be controversial, but I own the iShares most people by the B shares I bought the iShares S O B shares.

Air London listed A shares are the Dutch Netherlands listed shares a T end of the day.

Both will be comparable in coming years because the tax code is going to be more favorable in the future.

A zit seems as my research indicates, nothing's happened yet, but my understanding is they're gonna have a similar tax treaty in the future, like the U.

K in the U.

S.

Do.

And so the reason people go to the B shares is because they're UK listed. 00:13:58.080 --> 00:14:0.200 There's no foreign tax withholding. 00:14:0.480 --> 00:14:5.090 And so because I am the A shares, there's a foreign tax withholding. 00:14:5.140 --> 00:14:11.580 But I can claim back the foreign tax withholding on my on tax return as a credit.

And so for me, because I have thio file taxes anyways, I got I suspect, some dividend ambassadors, especially.

They live off dividends and they have a lower amount of dividends and they could do arbitrage and lives somewhere real cheap.

Maybe their tax consequences air just so minimal that they don't want to be dealing with foreign tax withholdings and tax credits.

But for me, I'm in a position where I definitely have ah complex tax return, have got to do taxes.

And so foreign credits for me, foreign tax withholding It doesn't really bother me because it all comes back anyways through the credit.

Anyways, I actually did a video on the taxes, tax implications and dividend investing, a link in the description below kind of not the most exciting topic of all time, but certainly a practical topic that I wanted to share. 00:14:58.320 --> 00:15:2.120 So check out that video if you want to learn a bit more on these types of topics. 00:15:2.290 --> 00:15:3.350 But I own the shares. 00:15:3.800 --> 00:15:8.850 The other reason I own the shares is when I was doing my research and this was years ago. 00:15:9.530 --> 00:15:18.590 The way this company was structured, the B shares were tied toe one side of their business that A shares were tied to another side of their business.

I don't even remember all of the details, but I think it was that the A shares were tied to the actual oil reserves.

The actual assets, the really oil that's in the ground.

Where is I think the B shares were kind of more tied to the refining side of things into some, uh, some of the other logistical side of things.

And so the way I looked at it, I tend to look at things from a very conservative standpoint, and when I invest, I want Thio II, at least for this one really wanted to have my hands on the A share was just cause I felt more confident about them. 00:15:53.540 --> 00:16:1.590 I think this is gonna be a very controversial topic out there because I know like 99% of dividend investors, they go for the B shares anyways. 00:16:1.590 --> 00:16:2.240 What's funny? 00:16:2.950 --> 00:16:4.110 I was in a year or two here. 00:16:4.110 --> 00:16:11.910 My understanding, because of the changes in the tax code A and B from attacks can Point will be roughly similar consequences.