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Analyzing Devon Energy, a Low Dividend Grower

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Why did DVN’s revenues fall in 2015 and 2016?

Devon Energy’s (DVN) revenues fell 36.0% and 7.0% in 2015 and 2016, respectively. Oil, gas, and natural gas liquids (or NGLs) sales drove the fall, followed by marketing and midstream revenues and oil, gas, and NGL derivatives.

DVN’s asset dispositions in 2016 were able to offset some of these factors. The rate of its decline in revenues improved in 2016 as the industry started recovering.

Why did DVN’s EPS fall in 2015 and 2016?

Devon Energy’s (DVN) operating expenses rose 112.0% in 2015 before falling 55.0% in 2016. This trend was due to significant asset impairments in 2015, which decreased in 2016. The company’s restructuring expenses also rose in both years. As a result, the company recorded negative operating income after falling 541.0%.

DVN’s operating income remained in negative territory after falling 86.0% in 2016. Other costs decreased 15.0% in 2015 before rising 82.0% in 2016. This increase was due to higher interest costs. These factors translated into a significant fall in its 2015 EPS, landing in negative territory.

DVN’s 2016 EPS fell 89.0% and remained in the negative zone. We saw an improvement in EPS for 2016.

The SPDR S&P Dividend ETF (SDY) is a dividend ETF with 3.0% exposure to energy. It has a PE ratio of 20.0x and a dividend yield of 2.4%. The iShares Core High Dividend ETF (HDV) is a dividend ETF with 19.0% exposure to energy. It has a PE ratio of 21.0x and a dividend yield of 3.3%.

In the next part of this series, we’ll examine DVN’s performance in 2017, its dividend, and a comparison with the broad indexes (SPX-INDEX)(SPY)(DJIA-INDEX)(DIA)(COMP-INDEX)(ONEQ).

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