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Analyzing ConocoPhillips’s Dividend Increase Announcement

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Dividend increase

On January 31, 2017, ConocoPhillips (COP) announced that it increased its quarterly dividend by 6% from $0.25 per share to $0.27 per share. Per COP’s press release, the new increased dividend will be payable on March 1, 2017, to stockholders of record at the close of business on February 14, 2017. This will be the dividend payment for 1Q17.

While commenting on its dividend increase, ConocoPhillips’s chair and CEO, Ryan Lance, said in a press release, “Today’s announced 6 percent increase in our quarterly dividend rate is consistent with our priorities and an important part of returning 20 to 30 percent of cash from operating activities to shareholders when combined with share buybacks.”

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Recent dividend and dividend yield

COP paid its last dividend on December 1, 2016. It paid a dividend of $0.25 per share on its common stock. This was the dividend payment for 4Q16. For the trailing 12 months, ConocoPhillips paid a total dividend of $1.00 per share on its common stock.

As of February 6, 2017, the company’s dividend yield, which measures the trailing-12-month dividend divided by its stock price, stood at ~2%.

Why COP’s dividend dropped steeply

In the last three years, ConocoPhillips’s dividend payment has fallen from $0.69 per share in 1Q14 to $0.25 per share in 4Q16. As seen in the above chart, ConocoPhillips’s dividend dropped steeply in 1Q16 when COP decided to reduce its dividend payment in order to deal with lower crude oil and natural gas prices.

Other upstream players

Due to the steep downtrend in energy prices, many upstream companies cut back on dividends. In 2016, Energen (EGN) and Denbury Resources (DNR) announced that they have discontinued their cash dividends on common stock in response to a significant decline in energy prices. The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies, whereas the ETF ISE-Revere Nat Gas Index Fund (FCG) invests in natural gas producers.

Next, we’ll look at COP’s ratings from Wall Street.

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