Is Woodside Petroleum Limited (ASX:WPL) a long-term buy? 

Woodside Petroleum Limited (ASX:WPL) is a portfolio favourite for many Australians. But should it continue that way?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Woodside Petroleum Limited (ASX: WPL) is self-described as Australia's largest independent oil and gas company with a global portfolio, recognised for its world-class capabilities – as an explorer, developer, producer and supplier of energy.  

Since December 2008, Woodside Petroleum has seen declining sales from $8.63 to $5.94 per share in December 2017. Consequently, earnings per share have dropped from $3.02 to $1.54 in the same time period. 

Conversely, Woodside Petroleum has increased its dividend from $1.32 per share in 2008 to $1.41 per share in 2017. As a result, in the last 10 years Woodside Petroleum has earnt $20 per share whilst paying out $15.59 as a fully franked dividend.  

Irrespective of reducing sales, Woodside Petroleum has been able to effectively allocate retained profits. Woodside Petroleum has retained $3.41 per share whilst growing book value per share by $13.24.  

With a market capital of $32.9 billion, Woodside Petroleum has a P/E ratio of 19 and a dividend yield of approximately 4.5%. This elevated price tag suggests the market is expecting growth from the company. 

Oil and Gas are essential energy sources for the short to medium terms. However, investors must consider the growing viability of the renewable energy sector.  

Epitomised by the growth of the electric car industry, renewable energy is becoming a more feasible alternative and a potential threat to Woodside Petroleum's future. 

Chief Executive Peter Coleman recently commented on the renewable energy sector, stating that gas is an essential component of a clean energy future. He later went on to say that "batteries pose no threat to gas – they don't generate energy, they just store it." 

Investors may need to decide whether his comments are accurate or naive. If he's correct, Woodside Petroleum should return earnings to shareholders for some time. If not, shareholders may need to look elsewhere to invest their money. 

Foolish takeaway 

Personally, I love the book value growth on retained earnings. I think it highlights management quality. However, Peter Coleman's words and my thoughts don't align and I believe this presents too much of a risk moving forward for my liking. 

Whilst I may be wrong, I'm happy to be wrong on the side lines. 

Motley Fool contributor Matt Breen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »