Dividend payout analysis
Falling oil prices might have quelled ConocoPhillips’ (COP) current valuation right now, but its dividend yield is still relatively high compared to some of its peers’.
ConocoPhillips (COP) pays investors $0.73 per share per quarter ($2.92 per share annualized), yielding at ~4.2%. In comparison, its peers Occidental Petroleum (OXY), Anadarko Petroleum (APC), and Apache Corporation (APA) are yielding ~3.8%, 1.4%, and 1.7%, respectively. All these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
The current 4.5% dividend yield is appealing to investors who might consider the oil stock safer than other oil companies’ stocks. The stock is considered safe because of ConocoPhillips’ (COP) ability to make money amid falling crude oil prices. The company’s break-even price is low enough for it to continue making money even when oil prices are low. However, investors may question how sustainable the dividend will be in a weak oil outlook.
Investors might find confidence in management’s comments that dividend payouts are its top priority.
Ryan Lance, chairman and CEO of ConocoPhillips, made the following comment during the earnings call: “Our top priority is the dividend. This is an important part of our investment thesis. The dividend provides discipline on our capital allocation process and we believe it is important in a mature business, so no change to the outlook on the dividend.”