Big oil is paying out years of dividends in one day

Big oil is paying out years of dividends in one day
-A +A

(Aug 6): Some oil and gas companies are flush with so much cash that they are paying out a full year’s worth of dividends in a single day — and sometimes more than that.

While reporting second quarter results on Thursday (Aug 4), ConocoPhillips informed investors that it will pay them US$1.40 (RM6.24) per share in a special dividend on Oct 14. For context, that’s almost three times its regular quarterly dividend of US$0.46, and shareholders get both the regular and the special payout. The shareholder reward comes after a full quarter of crude prices averaging around US$100 a barrel. 

Similarly, Tourmaline Oil Corp will reward its investors after a quarter of bumper natural gas prices, with a C$2 (RM6.89) per share special dividend on Aug 12 — worth roughly double a full year’s worth of its regular dividend payments. Its the third such special dividend from Tourmaline this year.

The energy industry right now is a “broken ATM spewing out cash and there aren’t enough people around to pick it up”, said Rafi Tahmazian, a senior portfolio manager at Canadian investment firm Canoe Financial. 

Tahmazian expects to see more investors flocking to energy companies distributing cash windfalls. The blockbuster payouts could even fuel energy stock performance this year. Rising oil prices, debt repayment and share buy-backs have all helped lift the S&P 500 Energy Index’s year-to-date returns to 31% this year, which is 44 percentage points ahead of the broader S&P 500 Index.

And more companies are chasing the trend. Oil and gas major Canadian Natural Resources announced a special dividend on Thursday of C$1.50 per share, to be paid on Aug 31. The reward is double the company’s regular quarterly dividend of C$0.75. On Friday, EOG Resources Inc also declared a special dividend of US$1.50 per share, twice its own regular quarterly dividend, likely to be paid on Sept 29.

At this point in the cycle, Canoe’s Tahmazian said the companies declaring special dividends have differentiated themselves from their peers in the eyes of income investors. “The distributors have mostly shown their colours,” he said.