Occidental Petroleum Corporation (NYSE:OXY) Should Be In Your Dividend Portfolio, Here's Why
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Over the past 10 years Occidental Petroleum Corporation (NYSE:OXY) has grown its dividend payouts from $1.28 to $3.12. With a market cap of US$50b, Occidental Petroleum pays out 57% of its earnings, leading to a 4.6% yield. Let me elaborate on you why the stock stands out for income investors like myself.
View our latest analysis for Occidental Petroleum
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
Its annual yield is among the top 25% of dividend payers
It has paid dividend every year without dramatically reducing payout in the past
Its has increased its dividend per share amount over the past
It can afford to pay the current rate of dividends from its earnings
It is able to continue to payout at the current rate in the future
High Yield And Dependable
The company's dividend yield stands at 4.6%, which is high for Oil and Gas stocks. But the real reason Occidental Petroleum stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. OXY has increased its DPS from $1.28 to $3.12 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
The current trailing twelve-month payout ratio for the stock is 57%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 84% which, assuming the share price stays the same, leads to a dividend yield of around 4.7%. However, EPS is forecasted to fall to $3.56 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Next Steps:
With Occidental Petroleum producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three relevant factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for OXY’s future growth? Take a look at our free research report of analyst consensus for OXY’s outlook.
Valuation: What is OXY worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether OXY is currently mispriced by the market.
Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
