Income Stock of the Week: GeoPark (GPRK)

While this is my income pick of the week, and GeoPark Limited (GPRK) pays a nice dividend, yielding over 5%, it’s extremely important when looking at income stocks to be as diligent as possible to ensure the dividend is safe. GeoPark is an income stock in value clothing. 

GeoPark is a South American based oil exploration and production company, with operations in Brazil, Chile, Ecuador and Columbia. The company has a 20 year record of finding and extracting oil, and has grown capacity at a compound annual growth rate (CAGR) of 12% overall, and 18% in Columbia, where it manages one of the largest oil deposits in the country. 

GeoPark’s value begins in its drilling operations where GPRK has a 75% drilling success rate over the past 16 years. One of these success stories is Llanos 34 in Columbia, which represents the largest oil find in the country in the past 20 years. The drilling site was purchased for $30 million in 2012, has produced almost $2 billion since drilling began, and is estimated to contain another $2 billion of production today.

I’ve spoken before about the price support that is in place for oil globally, and the recent outbreak of violence in the Middle East will only serve to bolster recent price increases. Oil is a global market, and investors often focus on oil companies only in the U.S., but South American companies like GeoPark will benefit as well from global prices. 

Let’s talk a moment about the “value” side of GeoPark. The company trades at a lowly PE of only 3.2, and at a super low 3x earnings. Its price to sales ratio is .88, and yet its operating margins are just under 50%. The company has $86 million of cash and cash equivalents on hand, and a credit facility of $80 million which has yet to be touched. 

Not surprisingly GPRK has an outstanding 94.64% rating on the Value component of our POWR Ratings. GeoPark also scores highly in the areas of Quality and Sentiment where it ranks above 80% of the companies we track in both categories. 

I like the conservative management of this South American driller, and think its income potential is in the sweet spot of the current oil market. 

What To Do Next?

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GPRK shares were trading at $10.40 per share on Tuesday afternoon, up $0.20 (+1.96%). Year-to-date, GPRK has declined -29.98%, versus a 14.94% rise in the benchmark S&P 500 index during the same period.

Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.

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