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•By holding the dividend at $2.64 after spinning off Phillips 66, Conoco raised its payout ratio from 30% of net profits to 44% of net profits.
•Most likely, Conoco will try and lower this payout ratio to the 25-30% range over the long term to allow for the capital projects necessary to fund growth.
•The implication is that, for the next several years, earnings per share may be increasing faster than dividends as the company recalibrates to a more appropriate long-term payout ratio.
After spinning off Phillips 66 (PSX) in 2012, Conoco (COP) management made an important decision: they chose to keep their dividend at $2.64 per share. This was significant because the removal of Phillips 66 from the Conoco corporate umbrella reduced Conoco's earnings per share from $8.76 in 2011 to $5.91 at the time of the spinoff. In other words, by keeping the payout steady without Phillips 66 on the balance sheet, Conoco effectively raised its dividend payout ratio from 30% in 2011 to 44% after the spinoff.
Now that Conoco is an exploration and production company, there can be an inclination to get the payout ratio more in line with the 25-30% range rather than the nearly 40-50% range that the company has been in since divesting Phillips 66.
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i just can't believe how my profits gets double today! oh, this is Perfect! Thank you so much.
Bought my first shares of this before the Phillips spinoff announcement, and have been holding long and strong. Kept all my COP and all my PSX that were spun off to me. Been rewarded with big share price increases and huge dividend raises. Looks like we might get another big dividend raise in the next few months! I love this stock.