Shares of Devon Energy (NYSE: DVN) tumbled after the oil and gas producer reported its third-quarter results. The primary issue weighing on shares was a reduction in the company's dividend. While Devon's combined fixed-plus-variable dividend payment of $1.35 per share for the third quarter was up 61% year over year, it was down 14.8% from the record $1.55 per share it paid in the second quarter. 

Even though Devon's dividend is down from the peak, the oil company has a potential catalyst that could push it higher in the future. Here's a look at what could fuel a higher dividend in the coming quarter and beyond.

Devon Energy's fixed-plus-variable dividend framework sees it pay a fixed-rate base quarterly dividend (currently set at $0.18 per share) and a variable dividend of up to 50% of its excess free cash flow each quarter. The company produced about $1.5 billion of free cash during the third quarter, down from the record $2.1 billion it achieved in the second quarter, due primarily to lower oil prices. It paid half that money via its variable dividend ($1.17 per share). 

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Source Fool.com