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Oil companies have been valued for the past several years on their dividends, which sometimes exceed 5% – a benefit that has partially offset poor stock performance in the industry

But investors got a big wake-up call in 2020 when some of the biggest names in energy slashed those dividends because they couldn’t fund them from their earnings when oil prices collapsed that included

Royal Dutch Shell

(Ticker: RDSA) and

BP

(BP) Now, some players have found another way to attract investors without feeling obliged to support a dividend that can seem too expensive when oil prices are low

Cimarex

Energy (XEC), a medium-sized Denver-based oil and gas producer, told analysts on Wednesday that it was considering introducing a variable dividend, and Cabot Oil & Gas, a Houston-based gas-focused producer, also announced a dividend strategy that will be implemented in Essentially the same thing, they would be the third and fourth oil and gas producers to adopt and join a variable dividend policy

Natural resource pioneer

(PXD) and

Devon Energy

(DVN)

The companies that do this say they will keep a base dividend that they can comfortably fund, and then pay an additional dividend to shareholders when they have enough free cash flow, Devon announced its first variable dividend last week and paid 19 cents per share on top of his quarterly base dividend of 11 cents on an annual basis, that would translate into a dividend yield of more than 5% versus a normal dividend yield of 2%

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“We’re excited to reward shareholders and differentiate ourselves from our competitors by declaring an industry-first variable dividend,” said the CEO
Rick Muncrief
in an opinion

Pioneer plans to distribute up to 75% of the annual free cash flow after the base dividend has been paid, as long as the debt remains in check

Cabot Oil & Gas announced on Wednesday that it will pay an additional dividend in the fourth quarter of each year starting this year to ensure it meets its goal of paying out at least 50% of its annual cash flow, which is a way Paying back shareholders without getting such a high dividend that the company will get stuck if prices go south

“The complementary component of this dividend approach allows us to focus on achieving a sustainable return on investment that is appropriately tailored to our position in the natural gas price cycle,” said Cabot CEO
Dan thing

Cimarex, which reported a profit Tuesday afternoon, increased its annual dividend by 23% to $ 1,08 a year for an 18% dividend yield while the board is planning to use its cash to pay off debt for the first time this year the board of directors “open to discussions about a variable dividend,” said CFO G Mark Burford on the company’s earnings call

Truist analyst Neal Dingmann believes this trend will continue. “I view variable dividends as a better alternative to buying back common stock in earlier years,” he wrote in an email to Barron’s

Oil companies have been valued for the past several years on their dividends, which sometimes exceed 5% – an advantage that has partially offset poor stock performance in the industry

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World News – FI – A new oil dividend trend could pay off for investors

Source: https://www.barrons.com/articles/oil-stock-dividend-cabot-pioneer-devon-51614208779