Income investors seek a steady stream of dividends. Occidental Petroleum’s dividend history is long and it might make a great addition to an income portfolio. Let’s take a look at the business, dividend history, and payout safety going forward.
Business Overview and Highlights
Occidental Petroleum (NYSE: OXY) is a $38 billion hydrocarbon exploration and manufacturing business. The company is based out of Texas and it employs 11,000 people. Last year Occidental Petroleum pulled in $18 billion in sales and that works out to $1.6 million per employee.
The company runs within the energy sector and maintains a solid credit rating (A-) from the S&P. This allows Occidental Petroleum to issue cheap debt to expand operations and pay dividends.
On May 9, 2019, Occidental Petroleum declared a quarterly cash dividend of $0.78. The dividend is payable July 15 to shareholders of record on June 10.
10-Year Dividend History
The company paid investors $1.31 per share a decade ago. Over the last 10 years, the dividend has climbed to $3.10. That’s a 137% increase and you can see the annual changes below…
The compound annual growth is 9% over 10 years… but over the last year, the dividend climbed 1.3%. The slowdown in dividend growth isn’t a great sign. Although, Occidental Petroleum still might be a good income investment. Let’s take a look at the yield…
Current Yield vs. 10-Year Average
Occidental Petroleum’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital and we’ll look at that soon.
The dividend yield comes in at 6.2% and that’s above the 10-year average of 3.94%. The chart below shows the dividend yield over the last 10 years…
The higher yield shows that investors have bid down the company’s market value. They might be expecting higher growth and payouts. But more often than not, the dividend yield is mean reverting with share price changes.
Improved Dividend Safety Check
Many investors look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So, a payout ratio of 60% would mean that every $1 Occidental Petroleum earns, it pays investors $0.60.
The payout ratio is a good indicator of dividend safety… but accountants can manipulate net income. They adjust for goodwill and other non-cash items. A better metric is free cash flow.
Occidental Petroleum’s payout ratio over the last decade has been steady, but the trend is up. The last year shows a payout ratio of 59%. This gives wiggle room for Occidental Petroleum’s board of directors to raise the dividend.
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