Introduction
Geopolitical developments often have a profound impact on commodity markets, and the recent escalation in the Israel-Iran conflict has once again brought this reality to the forefront. The direct military confrontation between both nations has triggered a steep spike in oil prices, reflecting the significant geopolitical risk premium demanded by investors. The probability of oil prices spiking beyond 100 US$ per barrel is not insignificant. It is said that roughly 20% of the global oil trade passes through the Straits of Hormuz. Any attempt by Iran to impose a blockade on this narrow waterway could propel oil prices well above the 100 US$ mark.
Against such a backdrop, CNOOC seems like an interesting investment opportunity, especially with the current trend of increasing oil prices. On top of that, it also offers an attractive 7.5% dividend yield at its current price of 18.66 HK$.
A Personal War Story – My Investment Experience with CNOOC
To help put this opportunity in context, I’d like to share my personal experience with CNOOC — not as a recommendation, but as an example of how dividend investing can intersect with value and cyclical analysis.
I bought my first tranche of CNOOC on 9th April 2021 at 7.93 HK$, during a period of extreme negative sentiment. At that time, you could feel the palpable sense of fear in the market following the NYSE’s announcement, on 26th February 2021, of their intention to formally delist CNOOC from the US exchange. Amidst the high uncertainty, the stock was sold down sharply by institutional and retail investors and the usual short sellers. Fundamentally, the company’s business remained as sound as ever. I continued to monitor the situation, and eventually assessed that the risk/reward trade-off was sufficiently attractive and decided to initiate a position on the H-share of the company that trades on the Hong Kong Stock Exchange.
The delisting was finally completed on 22nd October 2021. After the delisting, CNOOC’s management implemented a significant change in capital return policy. The new policy signaled the company’s intention to reward long-term shareholders by increasing the dividend payout ratio.
From 16% in 2021, the payout was increased to 45% in 2024. In nominal terms, the dividends increased from 0.30 HK$ to 1.40 HK$. Over my holding period, I collected a total of 3.77 HK$ in dividends, which meaningfully lowered my effective cost basis.
In 2024, I decided to take profits on my shares of CNOOC and sold my final tranche at 18.12 HK$ on 25th March 2024. Today, the stock is trading slightly higher at 18.66 HK$ (closing price on 16th June 2025), which still implies an attractive yield of 7.5% for new investors.
Evaluating the Merits of CNOOC Today
While I no longer hold CNOOC shares, the company continues to warrant attention. The company remains highly cash-generative, and if oil prices remain at current elevated levels, or continue to move higher, the cash windfall could support further rounds of dividend increases or special dividend distributions.
However, as with all upstream oil producers, it is important to highlight the cyclical nature of the business. CNOOC’s earnings and dividends are heavily affected by fluctuations in crude oil prices, which are influenced not only by supply-demand fundamentals but also by geopolitical events.
For that reason, I approach such stocks with a disciplined strategy:
- Buy during periods of extreme pessimism and/or when the commodity enters a bearish price cycle.
- Sell when the news cycle turns very bullish and/or the commodity enters an elevated price cycle.
This cyclical investment strategy has served me well in my CNOOC trade, and I believe it is particularly important for investors evaluating high-yield stocks in commodity-linked sectors.
Disclaimer:
This article is a record of the thinking behind a personal investment decision. It does not represent any recommendation to purchase any stock mentioned in the article. As always, readers are strongly advised to do their own due diligence before making any investment decisions.