Occidental Petroleum Corporation OXY recently announced that the board of directors has approved a 1.3% increase in the quarterly dividend rate. The revised dividend will be 79 cents, payable Oct 15, 2019 to its shareholders of record at the close of business on Sep 10.
The new annualized dividend rate of the company is $3.16 per share, resulting in a dividend yield of 6.26%. Its current dividend yield is better than the Zacks S&P 500 composite’s 1.88%.
Can We Expect Hikes in the Coming Years?
Occidental's continued focus on the Permian Resources has been beneficial for the company. Production from this region is expected to improve further from the current levels, thanks to the newly added wells.
Occidental’s definitive agreement to acquire Anadarko Petroleum APC for $38 billion will further expand its operation in the resource-rich Permian Basin. The combined company will have a production capacity of 1.3 million boe/d and is expected to be accretive to free cash flow within a year of the acquisition. The combined entity will generate $3.5 billion of free cash flow through $2 billion of annual cost synergies and $1.5 billion of annual capital reductions.
Occidental has also executed a strategic initiative to divest of lower-margin, lower-return oil and gas production, with the plan to replace it with higher-margin and higher-return production.
We expect these initiatives to help Occidental generate more free cash flow, which might help it return more to shareholders through buybacks and dividends.
Long History of Dividend Payment
Occidental has a long history of sharing profits with its shareholders. The company has been distributing dividend since 1975. Occidental has increased its annual dividend for 17 consecutive years. The total increase in annual dividend of the company from 2002 exceeds 500%.
Occidental is not the only Oil & Energy company that has been increasing quarterly dividend rate regularly. Exxon Mobil XOM and Chevron Corp. CVX have also raised dividend rate annually for the last consecutive 37 years and 32 years, respectively.
In the past month, Occidental’s shares have gained 1.4%, in line with its industry’s rally.
Occidental currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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