PXD - The Days of Gushing Oil-Fueled Dividends Appear to Be Over
2023-05-13 09:15:00 ET
In early 2021, Devon Energy (NYSE: DVN) launched the oil industry's first fixed-plus variable dividend framework. It paid a fixed base quarterly dividend that it routinely increased. In addition, Devon pays a variable dividend of up to 50% of its remaining excess cash flow.
Many oil companies used that blueprint to launch similar frameworks. With their free cash flow soaring along with oil prices, the industry paid a gusher of dividends. However, with oil prices cooling off in recent months, oil companies have less cash to return to shareholders. That's driving down dividend payments for companies like Devon . Meanwhile, several other oil companies are shifting their capital allocation priority from paying variable dividends to repurchasing shares .
Pioneer Natural Resources (NYSE: PXD) set its dividend bar higher than Devon Energy, aiming to pay out up to 75% of its total quarterly free cash flow via dividends. With its oil-fueled cash flows soaring last year, Pioneer Natural Resources paid a deluge of dividends. The oil company's total dividend outlay was over $25 per share, putting its dividend yield in the double digits .
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The Days of Gushing Oil-Fueled Dividends Appear to Be Over