No ones like to talk about Total SA, the French oil giant that is one of the “Big Six” publicly traded energy firms in the world, because the French government is fond of taxing the business highly and American investors have to deal with filing separate paperwork to recapture some of their dividend that the French government takes out for the payout (and, in the typical IRA, you don’t get any kind of dividend recapture/refund for the French tax, although the rules for self-administered pension funds are more favorable).
This dividend doesn’t go up every year because, as is custom with most European companies, dividend payouts match profits in that year, and so you don’t get the Americanized effect of a smooth dividend payout that goes up with every year. That’s another reason why American investors, particularly retirees, don’t have much of a desire to go near the stock.
But as an income stock for an investor—that is, someone that wants to regularly receive reliable chunks of income from an investment and deploy it elsewhere, Total SA is invaluable.
If you could go back to 2003, you could see that Total SA could be purchased for $30 per share. Compared to the price today, it’s nice to see that you doubled your investment from the change in share price. But the dividend is where the real action is.
In 2003, you collected $1.17 in dividends. Then, the dividend payout went like this: $2.19 (2004), $1.84 (2005), $2.19 (2006), $2.81 (2007), $3.10 (2008), $3.28 (2009), $2.93 (2010), $3.11 (2011), $2.98 (2012), $3.13 (2013), $3.30 (2014 estimated). That’s right; you would have collected more in Total SA dividends since 2003 than the price required to buy the stock. You would have paid $30 for each share, and collected $32.03 from 2003 through 2014.
Some of you write to me expressing an interest in being capital allocators—you want to spend your days making investments. If you aren’t bringing in a lot of investable income from a business you run or your own labor, then you’re going to want companies that fit the profile of Total SA. The building blocks of a portfolio of someone that wants to be a capital allocator are things like GlaxoSmithKline, Royal Dutch Shell, AT&T, Altria, Reynolds Tobacco, BP, Conoco Phillips, and of course, Total SA. Over ten, fifteen, twenty years, they give you lots of income to make brand new decisions.
With Total SA, the story is always the same—slow growth in the 5% range perpetually expected, constant fear of French taxation, and so on. I don’t see this to diminish or to discredit those concerns, but Total SA rarely has experienced blistering growth since becoming the signature French company, and the company is paying 20% higher taxes now than it did in 2003. In other words, the fears come true, and you still collect more total dividend income than the amount invested in 2003.
Finding these cash cows early in life is a blessing because you are constantly being given a chunk of change to deploy elsewhere—think about what you could have done with those Total SA dividends over the past eleven years. Someone with 1,000 shares of Total SA in 2003 would have collected $32,030 to build positions in Disney, IBM, Becton Dickinson, Visa, and so on. And, of course, those new purchases would be paying out dividends of their own as well. Things are so much easier when you get something like Total SA on your household balance sheet in a meaningful amount at the earliest age possible.
Originally posted 2014-09-08 08:00:41.