There's A Lot To Like About Occidental Petroleum's (NYSE:OXY) Upcoming US$0.18 Dividend - Simply Wall St

There's A Lot To Like About Occidental Petroleum's (NYSE:OXY) Upcoming US$0.18 Dividend - Simply Wall St News

Stock Analysis

United States
- /
Oil and Gas
- /
- NYSE:OXY

There's A Lot To Like About Occidental Petroleum's (NYSE:OXY) Upcoming US$0.18 Dividend

Occidental Petroleum Corporation ( NYSE:OXY) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Occidental Petroleum investors that purchase the stock on or after the 8th of June will not receive the dividend, which will be paid on the 14th of July.

The company's next dividend payment will be US$0.18 per share, and in the last 12 months, the company paid a total of US$0.72 per share. Calculating the last year's worth of payments shows that Occidental Petroleum has a trailing yield of 1.2% on the current share price of $59.69. If you buy this business for its dividend, you should have an idea of whether Occidental Petroleum's dividend is reliable and sustainable. So we need to investigate whether Occidental Petroleum can afford its dividend, and if the dividend could grow.

See our latest analysis for Occidental Petroleum

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Occidental Petroleum is paying out just 6.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 11% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Occidental Petroleum's earnings have been skyrocketing, up 42% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Occidental Petroleum looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Occidental Petroleum's dividend payments per share have declined at 10% per year on average over the past 10 years, which is uninspiring. Occidental Petroleum is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Should investors buy Occidental Petroleum for the upcoming dividend? It's great that Occidental Petroleum is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Occidental Petroleum looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Occidental Petroleum has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Occidental Petroleum(1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Occidental Petroleum is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
View the Free Analysis

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

About NYSE:OXY

Occidental Petroleum

Occidental Petroleum Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, North Africa, and Latin America.

Solid track record and fair value.

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