This High-Yield Stock Is Adding More Fuel to Its Dividend Growth Engine
Diamondback Energy's (NASDAQ: FANG) free cash flow has soared this year. The oil company produced a record $1.3 billion in free cash flow in the second quarter thanks to higher oil prices. And while crude prices cooled off somewhat in the third quarter, its free cash flow was still strong at nearly $1.2 billion.
That oil-fueled influx of cash has enabled Diamondback to pay monster dividends this year, with a rapidly rising base payout and sizable variable dividends. Even better, Diamondback this week announced it was acquiring another cash-gushing oil property in a deal that will give it more fuel to pay dividends in the future.
On Wednesday, Diamondback Energy revealed that it has agreed to acquire all the leasehold interests and related assets of Lario Permian in the Northern Midland Basin. It's paying $850 million in cash and 4.18 million shares. That values the target company at 3.3 times its estimated 2023 EBITDA and a 21% free-cash-flow yield. It will be immediately accretive to all the company's relevant 2023 and 2024 financial metrics, including free cash flow per share. Because of that, Diamondback Energy expects the deal will increase its 2023 cash returns to shareholders by more than 5% per share.
Source Fool.com
