Royal Dutch Shell plc (ADR) (RDS.B), Total SA (ADR) (TOT), Eni SpA (ADR) (E) – BlackRock Sees Market Rotation: Part 1

Although Total SA (ADR) (NYSE:TOT)’s dividends are more variable than Shell’s, the disbursement has been growing in recent years. At the end of 2012, debt made up about 25% of the capital structure and the company had around $15 billion in cash. Plenty of financial flexibility to keep the business growing.

Into Africa

Eni SpA (ADR) (NYSE:E) is an Italian oil giant with a yield around 4.5%. Although this is probably the least desirable of the three foreign oil companies here, it has one distinction that makes it more interesting: exposure to Africa. It is the largest player on that continent. It also has notable exposure to the Middle East.

The company’s proximity to these regions and management’s focus on keeping solid relations with often difficult countries are key long-term assets. However, political risk can, and often does, drive Eni SpA (ADR) (NYSE:E)’s share price. With a modest 25% of the capital structure made up of long-term debt and over $7 billion of cash at year end 2012, the company has the financial strength to live through political friction in key supply markets.

One negative, however, is that the Italian government plays a larger role than most investors might like in how the company is managed. Thus, the company’s profitable oil and natural gas business supports a number of other divisions that have been losing money. Still, investors looking to tap the natural resources of Africa have a decent choice here. Dividends, however, have been quite variable.

Commodity

Oil and natural gas are commodities, so the top and bottom lines of these companies are inherently volatile. However, the long-term demand for oil and natural gas isn’t likely to change any time soon. If BlackRock is right about a rotation into energy companies, these three giants are likely to be beneficiaries. Even if BlackRock is wrong, they are still solid companies paying you well to own their shares.

The article BlackRock Sees Market Rotation: Part 1 originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Total SA. (ADR). Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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