Oil Dividends Are Falling. Is It a Sign It's Time to Sell Oil Stocks?
Oil companies have paid out a gusher of dividends this year. Many companies instituted fixed-plus-variable dividend strategies to return more of their free cash flow to shareholders over the past year. With oil prices topping $100 a barrel earlier this year, it boosted their free cash flow, allowing them to pay increasingly larger dividends.
However, in recent months, oil prices have cooled off on concerns that the economy's heading toward a recession. As a result, oil-fueled variable dividends are falling. Here's a look at whether these falling dividend payments signify that investors should sell their oil stocks.
Devon Energy (NYSE: DVN) launched the oil industry's fixed-plus-variable dividend framework early last year. The company started with an $0.11 per share quarterly base dividend. It made its first variable dividend payment of $0.19 per share in the first quarter of 2021, paying out a total of $0.30 per share. Devon has since increased its base dividend payment to $0.18 per share while paying a steadily rising variable dividend. At the peak, the combined payment reached $1.55 per share in the second quarter.
Source Fool.com
