The energy companies are at the top of the ranking of the dividend yields from the S&P 500 stocks. This is against the background of the high energy prices that inflate the profit line of the energy companies – oil miners, drillers and gas carriers, enjoy, and return value to investors. But the question arises whether they will be able to continue to give a large dividend even when profits shrink – if not, then the current dividend is temporary.
Devon Energy – Devon is engaged in exploration, drilling, production and refining of oil and natural gas. At the end of the process, it processes the oil and gas, stores and sells it. In the last quarter, the company recorded a net profit of 1.9 billion dollars, with a free cash flow of 2 billion dollars, which is of course the source of the large dividends. At the end of 2020, the company was not profitable, which reinforces the fact that the high dividends are probably temporary for now, unless the energy market remains at high prices. As mentioned, an annual dividend yield of 9.1%, the last dividend was paid in June, $1.27 per share.
Diamond-Beck Energy – It also engages in development, exploration and activity in the field of oil and gas, the company owns gas and oil fields in the United States, including in West Texas and the Permian drainage basin. The stock trades according to a market value of 22 billion dollars, and here specifically it can be understood that this is a one-time dividend. The company has granted a quarterly dividend over the years of between 20 and 50 cents per share. In the last 2 quarters, the company has increased its quarterly dividend to $3.05 per share. This is in coordination with the company’s profits, which in the last 2 quarters reached an all-time high, 1.4 billion dollars in the line of net profit. In addition to this, in the last quarter the company produced the largest free cash flow from its IPO – 1.1 billion dollars, which it directed to returning value to investors.
The last one and the one that pays the most – Pioneer Natural – Here, too, this is probably a temporary dividend. In the last quarter, the company distributed $7.38 per share as a dividend, a quarter before that it paid $3.78 per share as a dividend, a quarter before that the dividend was only 50 cents. Like the dividend, it is also the largest company of the three with a market capitalization of $60 billion. The company is engaged in the exploration and production of crude oil, natural gas and liquefied gas, internationally, including drilling facilities on the continent of Africa, Latin America and the United States. From the second quarter in 2021, the company’s net profit was able to double 5 times, and the quarterly free flow, which was 737 million dollars, in the last quarter was 2.3 billion dollars, so why not indulge in a huge dividend?
Leading analysts have reacted to the great returns of the energy companies, they mainly hang the forecasts of the continuation of the high dividend, on one thing – the price of oil. Morgan Stanley analyst Devin McDermott wrote: “Devon sees it as capable of delivering a total fixed dividend yield (dividends plus buybacks) of about 9% in 2023, assuming crude oil remains above $90 a barrel.”
He added that: “The debate between unstable dividends and a buyback of the company was common among Devon’s investors, but in the end without a clear agreement on which is preferred. However, everyone agreed that returning value to shareholders is positive.”
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