ConocoPhillips’s capital distribution plans
ConocoPhillips (COP) plans to return capital to its shareholders by using dividend payouts and flexible distribution components such as share repurchases. ConocoPhillips believe that flexibility is important in these distributions in order to maintain a low break-even price. ConocoPhillips plans to return 20%–30% of its cash flow to its shareholders.
ConocoPhillips’s dividend payout plans
According to ConocoPhillips’s management, a resilient and steadily growing dividend is vital to the company’s value proposition. COP’s current dividend payout is set at a level that supports free cash flow generation and can increase steadily with growing cash flow.
ConocoPhillips’s second key cash allocation priority is increasing its annual dividend payout. To learn more about ConocoPhillips’s key cash allocation priorities, please refer to Part 2 of this series.
In the first three quarters of 2016, ConocoPhillips paid a total dividend of $0.75 per share on its common stock. The indicated annual dividend rate is $1.00 per share. As seen in the above chart, ConocoPhillips’s current dividend yield on September 30, 2016, was ~3.4%. This is a higher yield than the S&P 500, as well as oil and gas producers Marathon Oil (MRO), EOG Resources (EOG), and Encana (ECA).
ConocoPhillips’s share repurchase plan
In the next three years, ConocoPhillips (COP) plans to spend $3 billion on share repurchases. The company plans to start its buyback program in 4Q16. Based on COP’s current dividend, fully executing the share repurchase program would represent an ~80% increase in shareholder payouts.