EC - Ecopetrol: Colombian Oil Producer Offers 14.7% Dividend On Stable Oil Prices

2024-03-08 10:14:05 ET

Summary

• Ecopetrol's strong financials offer a great reward against the risks of the leftist government and potential decreasing oil prices.
• As long as oil doesn't fall too much, Ecopetrol will likely return high returns per share to shareholders.
• I believe the market is overestimating the risk of the left-wing Colombian leader and the increasing debt levels on Ecopetrol.

Ecopetrol S.A. is the third-largest energy and infrastructure group in Latin America. In 2023, they boasted a 14.4% ROAE. Their total production is the highest it has been since 2015, but their share price is down almost 50% from its 2019 price when oil was trading at $50-60/bbl. I believe the market is overestimating the risk of the left-wing Colombian leader and the increasing debt levels for Ecopetrol. Concurrently, the decreasing oil price has been putting downward pressure on the stock. Together with my long-term bullish thesis for oil, I believe Ecopetrol is undervalued and is a buy....

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