Chart of the Day: The Value Stocks of Big Oil

Today’s Chart of the Day, shared by my colleague Angie Parsons, is from an article in Bloomberg which illustrates what a “value” stock is.

The black line represents the history of five of some of the largest oil companies’ distributions to their shareholders vs. their earnings in yellow. As you can see, last year they distributed (through dividends and stock buybacks) more than 100% of their earnings to shareholders, which makes this a textbook example of value stocks: companies in a mature industry, demonstrating stable profits, low growth, and able to give profits back to shareholders.

In contrast, “growth” stocks, which are the exact opposite, are typically in a growing industry, such as technology, that does not have a lot of profits yet since they reinvest them into research and development and use any excess cash flow to invest for future growth.