Occidental Petroleum Corp billboard_ by Poetra_ RH via Shutterstock
Western Petroleum (OXY) It is likely to increase its dividend next quarter. That could take it to at least $1 per share, giving OXY a potential return of 2.42%. Its five-year average is lower, and at 2.0%, OXY would be worth $50 per share, or 21% more.
OXY is listed on $41.34 per share, well below its recent high of $48.10 on September 29. Given the strong likelihood of an upcoming dividend per share (DPS) increase, this seems like a low point.
OXY Stock – Last 3 Months – Bar Chart – As of Nov 25, 2025
That’s how math works. Right now, DPS is 24 cents per quarter or 96 cents per year. Thus, at the current price, the annual yield is 2.32%:
$0.96/$41.34 = 0.0232 = 2.32%
But Occidental Petroleum has been increasing its DPS every year after four quarterly payments. It has already made four payments at 24 cents per share. So next quarter, probably late January or early February, Occidental could announce a dividend increase.
That means that if Occidental increases annual DPS to at least $1 per share, or 4.2% more, the potential return is now 2.42%:
$1.00 / $41.34 = 0.02418 = 2.42%
But will this be where OXY will stay? Not likely, given its historical average dividend yield.
OXY Stock Valuation
It turns out that over the past 5 years, OXY stock has returned an average of 1.29%, according to Yahoo! Finance. That implies OXY stock could be worth it. +87.5% further:
$1.00/0.0129 = $77.52 price target
$71.52 / $41.34 -1 = 1.875 -1 = +87.5%
Just to be conservative, let’s look at the dividend yield for the last two years. Morningstar reports that in 2024, the average return was 1.78% and so far this year it has averaged 2.27%:
(1.78% + 2.27%)/2 = 2.025% average last 2 years
In other words, we can assume, very conservatively, that there is a good chance that OXY stock will rise to the point where it could return 2.0%:
$1.00 / 0.02 = $50.00 target price
That’s 20.95% more than the current price. In other words, we can project a 21% increase. If the company increases its dividend by 4.2%, the stock could rise 21%.
Analysts agree that OXY stock is undervalued
Yahoo! Finance reports that the average price target for 25 analysts is $50.42 per share. That’s very close to my price target. Similarly, Barchart’s average price target is $49.64 per share.
Additionally, AnaChart, which covers recent analyst articles, reports that 19 analysts have an average price target of $51.72 per share. That implies a +25% increase from today.
The bottom line is that OXY stock looks deeply undervalued here.
One way to play this, not the only one, is to sell short out-of-the-money (OTM) puts. This way, an investor can set a potentially lower buy point. Plus, they get paid while they wait.
Shorting OTM OXY Put Options
For example, the $40.00 The put strike price for options expiring December 26, 2025 has a midpoint premium of 97 cents.
That means that an investor who enters a “Sell to Open” order will make this sale. 2.425% (i.e. $0.97/$40.00) for the next month. This is equivalent to one year’s dividend yield!
The breakeven point is even lower: $39.03 (i.e. $40.00 – $0.97). That’s 5.4% less than the current price. Therefore, there is good protection against falls.
Furthermore, at that price, even if the stock falls to $40.00, the annual return is 2.56%:
$1.00 Prospective DPS / $39.03 = 0.0256 = 2.56% annual return.
More risk-averse investors could short the $38.00 put option for a premium of 44 cents. that produces 1.158% (i.e. $0.44/$38.00) for 1 month.
The bottom line is that OXY stock looks cheap here. One way to do this is to sell short out-of-the-money (OTM) puts in one-month periods.
On the date of publication, Mark R. Hake, CFA had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, see Barchart’s Disclosure Policy here.
