It’s no secret that Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) CEO Warren Buffett is a major investor in Occidental Petroleum (NYSE:OXY). It’s been reported that Buffett holds more than 2.24 million shares of OXY stock and collects substantial quarterly dividends from those shares.
Yet, Buffett wouldn’t just buy a stock to collect dividends. To meet Buffett’s criteria, Occidental Petroleum has to be a great company.
With that in mind, let’s take a deep dive into Occidental Petroleum’s business operations. The company is a premier oil and gas driller, but there’s more to the story than that. All in all, you’ll surely agree with Buffett that Occidental Petroleum is worth investing in for the long term.
Get Exposure to the Permian Basin With OXY Stock
In a moment, we’ll discuss how Occidental Petroleum is investing in the future of clean energy. However, there’s no denying that Occidental Petroleum’s bread and butter is still oil and gas.
The Organization of the Petroleum Exporting Countries (OPEC) reportedly stated that fossil fuels comprise more than 80% of the global energy mix. I can’t confirm that figure, but Occidental Petroleum’s fossil-fuel business operations will be lucrative for at least a few more years.
Furthermore, the U.S. Energy Information Administration reported that the U.S. Permian Basin was leading the way in new oil and gas production. Buffett has acknowledged that he bought OXY stock because of Occidental Petroleum’s dominance in the Permian Basin.
Yet, I suspect that Occidental Petroleum’s quarterly dividend payments also enticed Buffett. He probably also likes Occidental’s trailing 12-month price-to-earnings (P/E) ratio of 10.79x, which suggests a good value.
Occidental Petroleum’s Carbon Capture Ambitions
At the same time, let’s not ignore Occidental Petroleum’s ambitions in the clean-energy space. You might be surprised to discover that Occidental Petroleum’s business interests are diversified beyond oil and gas as the company enters the carbon capture market.
First, Occidental Petroleum subsidiary 1PointFive is teaming up with United Arab Emirates (UAE)-based ADNOC to research a 1 million tonne-per-year direct air capture (DAC) facility in the UAE. The two companies intend to “explore carbon capture, utilization and storage projects in the United States and the UAE.”
Furthermore, 1PointFive has a decade-long carbon removal credit purchase agreement with Amazon (NASDAQ:AMZN). This should be a major windfall for 1PointFive and Occidental Petroleum as Amazon has “agreed to purchase 250,000 metric tons of carbon dioxide removal (CDR) credits over 10 years.”
OXY Stock: Great for Dividend Collecting and Reinvesting
Why is Buffett so interested in Occidental Petroleum? I suggest it’s a combination of factors. Occidental Petroleum trades at a very reasonable valuation. Plus, Occidental provides exposure to the fossil fuel and carbon capture markets.
On top of all that, Occidental Petroleum offers consistent dividend distributions that you can collect and reinvest. Now, it’s easy to see why Buffett likes to buy and hold OXY stock. So, if you want to be like Buffett, you’re invited to start your own share stake in Occidental Petroleum.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
