As one of the largest ASX oil and gas producers on the market, the Woodside Petroleum Limited (ASX: WPL) share price has failed to post much in the way of capital gains so far in 2019.
The Woodside Petroleum share price has climbed just 5.61% higher since the start of January as the ongoing US–China trade war, Brexit concerns and tensions with Iran have made crude oil prices volatile in 2019.
But given its strong standing in the market and $30.34 billion market cap, could the Woodside share price be in the buy zone as we head into 2020?
What’s good about Woodside shares?
Woodside is Australia’s largest operator of oil and gas production and posted a half-year net profit after tax (NPAT) of US$419 million (~A$625 million) in a relatively soft result through to 30 June 2019.
The Federal Government’s efforts to bring down east coast Australian electricity prices have failed thus far and this has supported the earnings of Woodside and other Energy sector companies such as AGL Energy Ltd (ASX: AGL).
Woodside shares are currently yielding 5.60% per annum, which is far from the worst in the sector, meaning they could be a good option to diversify your portfolio while boosting dividend income higher in 2020.
However, long-term Woodside shareholders haven’t seen the capital gains they might have expected with the Woodside share price having fallen from the $50 per share mark to $32.20 over the past 10 years.
What are the alternatives?
The Santos share price is up 45.45% while the Beach Energy share price has nearly doubled since the start of January to be trading at $2.47 per share at the time of writing.
In terms of earnings, both Beach Energy and Santos posted strong profits in the latest August reporting season, which saw their share prices shoot higher over the last month or so.
In its full-year results, Beach reported an underlying net profit up 86% to $560 million for the year in a bumper result that pleased shareholders with strong production numbers reflected in strong company earnings.
Should you buy Woodside shares?
Despite the Oil & Gas sector’s exposure to crude oil volatility, I think there is a place in a well-diversified portfolio for a large-cap ASX stock such as Woodside or Beach Energy.
Woodside’s current 5.60% dividend is well above that offered by either Beach or Santos, but I think given the relative capital gains of the latter two stocks in 2019 it is far from an adequate comparison.
Overall, I think the Woodside share price might be slightly overvalued and I’d want to see some increased share price growth before adding Woodside shares to my existing portfolio.
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Motley Fool contributor Kenneth Hall 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.