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Occidental’s (OXY) Board Approves 1.3% Hike in Dividend


Occidental Petroleum Corporation’s OXY Board of Directors announced the company’s regular quarterly dividend of 78 cents per share, which annually stands at $3.12. The figure reflects a 1.3% hike compared with the previous annual rate of $3.08 per share.

Details of the Dividend Raise

The quarterly dividend of 78 cents per share is payable Oct 15, 2018 to shareholders of record as of Sep 10, 2018. The company has been consistently paying quarterly dividend since 1975.

The board members of Occidental Petroleum have been clearing annual dividend hikes for more than a decade now. Notably, yearly payout increases are becoming a steady policy for this Oil and Gas integrated major. The company’s latest move marks the 16th consecutive year of dividend raise.

The current annualized dividend yield is 3.7% compared with the S&P 500 average of 1.8%. This rise in distributable income vouches for the company’s strong balance sheet and a constant cash flow position, providing it with financial flexibility and a cushion for incremental dividend.

Can Occidental Petroleum Sustain Dividend Increases?

Occidental Petroleum's continued focus on the Permian Resources has been beneficial for the company. Permian production grew 18,000 barrels of oil equivalent per day (boe/d) sequentially to 177,000 boe/d in the first quarter. The output from this region is expected to improve further from the current levels, courtesy of the new wells added to this region in 2018. Occidental Petroleum expects production from this area in the range of 198,000-210,000 boe/d in 2018, which will further boost margins.

In the first quarter, capital expenditures were $1,032 million, of which, $574 million were invested in the Permian Resources. A substantial portion of its planned 2018 capex will be directed toward the same to further strengthen its operation in the region.

Occidental Petroleum hatched a strategic plan to divest lower-margin, lower-return oil and gas production and replace it with higher-margin, higher-return production from the Permian Resources business.

We believe, the company’s strong cash flow, concentration on Permian Resources and organic growth will help generate sufficient funds to meet its financial commitments.

Dividend Hikes in the Same Space

Occidental Petroleum is not the only company to reward its shareholders with increased dividend. There are also other players in the same sector to add shareholder value.

For instance, TOTAL S.A. TOT announced the final dividend of 62 cents per share on Jun 1, 2018, bringing the annual dividend to $2.48, registering a 1.2% raise compared with the annual dividend amount paid in the previous year.

On Feb 7, 2018, Anadarko Petroleum Corporation APC approved a quarterly hike in cash dividend of 25 cents per share, payable to shareholders by a staggering 400% compared with the previous quarter’s payout of 5 cents.

Also, on Feb 7, 2018, Suncor Energy Inc.’s SU board cleared a 12.5% hike in quarterly dividend of 36 cents per share, payable Mar 26, 2018 to shareholders holding scripts as on record date.

Price Movement

Occidental Petroleum’s stock has surged about 41.4% in the past year compared with Zacks Oil and Gas – Integrated industry’s rally of 24%.

Zacks Rank

Occidental Petroleum currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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