Big 10% Dividends being Pumped to Investors by Oil and Gas Companies appears to be Sustainable.
Oil and gas companies are paying big dividends at near 10% or more. These dividends mean money is being returned to investors as opposed to going into finding and developing new production. Historically when companies had high prices and lots of cashflow they invested heavily and with leverage. The past couple of down cycles bankrupted lots of companies and made the survivors more conservative. Hence in aggregate, there is not enough capital going to development meaning supply will not overshoot demand. Higher prices are the result and will make the industry less boom bust. Dividend payments as the use of capital make the dividends more sustainable than history would indicate.
We own lots of companies in the sector with 5 of our favorites being:
Civitas Resources (CIVI) 12% Dividend Yield
Devon Energy (DVN) 11% Dividend Yield
Petroleo Brasileiro S.A.- Petrobras (PBR) 24% Dividend Yield
Chesapeake Energy (CHK) 8% Dividend Yield
Pioneer Natural Resources (PXD) 9% Dividend Yield