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How Did COP’s Dividend Cut Affect Its Dividend Yield?

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Why did COP’s 9M17 EPS fall despite revenue growth?

ConocoPhillips’s (COP) revenues and other income recorded 39.0% growth in 9M17. Every segment of the company drove this growth. Its costs and expenses rose 23.0% due to significant impairments.

As a result, COP’s income from continuing operations remained negative after falling 29.0%. These factors translated into negative earnings per share (or EPS) after falling 31.0%. Share buybacks further enhanced the company’s EPS. COP has generated negative free cash flow since 2014.

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How has COP’s dividend yield evolved over the years?

ConocoPhillips (COP) took a 66.0% dividend cut in 2016, followed by 6.0% growth in its dividend per share for 2017. COP stock has risen 7.0% on a year-to-date (or YTD) basis and in 2016. This trend explains the downward sloping dividend yield curve in 2016, followed by its current flattened curve.

ConocoPhillips has a dividend yield of 2.0% and a YTD return of 6.8%. These numbers compare to a sector average dividend yield of 1.6% and a PE ratio of 34.0x.

Comparison with broad indexes

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 22.7x, and a YTD return of 15.5%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3%, a PE ratio of 21.2x, and a YTD return of 18.7%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x and a YTD return of 25.4%.

The Fidelity Dividend ETF for Rising Rates (FDRR) is a dividend ETF with 6.0% exposure to energy. It has a PE ratio of 17.0x and a dividend yield of 2.7%. The O’Shares FTSE US Quality Dividend ETF (OUSA) is a dividend ETF with 7.0% exposure to energy. It has a PE ratio of 20.2x and a dividend yield of 2.3%.

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