ConocoPhillips (COP 2.45%) is one of the country’s largest oil producers. It has grown tremendously over the last five years by making a series of acquisitions. These deals have increased its scale and low-cost resources, enabling it to produce more excess cash to return to shareholders.
That strategy has paid off for those who invested in the oil stock five years ago. Here’s a look at what a $10,000 investment made in early 2020 would be worth today.
The path since the pandemic
2020 was a rough year for everyone. It was especially challenging for the oil patch because economic shutdowns caused demand to dry up. At one point, crude prices in the U.S. crashed into negative territory.
However, those brave enough to bet big on ConocoPhillips during those dark days have made a lot of money:
COP data by YCharts
As that chart shows, a $10,000 investment made into ConocoPhillips during the early days of the pandemic would have grown to over $29,500. Meanwhile, the total return would be even higher for those who reinvested their dividends. That’s much more than you could have earned by parking that money in an S&P 500 index fund.
Several factors helped fuel those high-octane total returns, including recovering oil prices, acquisitions, and rising shareholder returns. Acquisitions have played a key role in accelerating ConocoPhillips’ growth and ability to return cash to investors. The company made a bold pandemic-era strike by acquiring Concho Resources in a $9.7 billion all-stock deal in late 2020 to bolster its presence in the oil-rich Permian Basin. It followed that up a year later by acquiring Shell‘s Permian assets for $9.5 billion. Those deals helped grow its production and cash flow.
ConocoPhillips recently completed its biggest deal, buying Marathon Oil for $22.5 billion. That acquisition should fuel continued cash flow growth in the coming years. It positions the oil giant to buy back a boatload of its stock while continuing to deliver high-octane dividend growth. Because of that, it should have plenty of fuel to continue growing shareholder value over the next five years.
Matt DiLallo has positions in ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
