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Continental (CLR) Rewards Investors With Dividend Initiation

Zacks Equity Research

Continental Resources, Inc. CLR recently announced the initiation of a quarterly dividend and a share buyback program. These growth initiatives and shareholder-friendly moves are expected to boost investors’ sentiments. The board of directors of the company has given a green signal for the initiation of a dividend of 5 cents per share.

The move reflects the company’s strong focus on returning cash to its shareholders. The dividend amount translates to 20 cents per share on an annualized basis. However, it reflects a dividend yield of 0.6%, lower than the industry average of 1.1%. The dividend is likely to be paid on Nov 21, to stockholders of record as of Nov 7.

Moreover, it approved a $1-billion share buyback program, which is expected to commence in the second quarter of 2019 and continue through 2020. The company expects a major portion of the amount to be used this year.

These moves are supported by the company’s ability to generate significant free cash flow from its operations. In the trailing four reported quarters, Continental generated more than $3 billion of free cash flow. Moreover, assuming $60 per barrel of oil at WTI, it expects to generate $5 billion of free cash flow in the next five years, which is higher than the previous expectation. This reflects tremendous strength in its operations.

Continental Resources is focused on strengthening balance sheet to gain financial flexibility. The company was able to reduce net debt by around $1.7 billion in the past three years. It plans to reduce net debt from the current level of $5.5 billion to $5 billion by 2019-end. It will further reduce the amount below $4.2 billion in the long run.  

Several energy sector players announced dividend hikes lately. While drilling company Ensco Rowan plc ESV suspended regular quarterly cash dividend payout, major refining and marketing company Phillips 66 PSX awarded its shareholders with a quarterly dividend hike. Another upstream energy company, Noble Energy, Inc. NBL bumped quarterly dividend payout by 9% during April-end.

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