Last update on 2024-06-27

Occidental Petroleum (OXY) - Dividend Analysis (Final Score: 5/8)

Occidental Petroleum (OXY) - Comprehensive dividend analysis with an 8-criteria scoring system, score: 5/8. Evaluates performance and stability for 2023.

Short Analysis - Dividend Score: 5

We're running Occidental Petroleum (OXY) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the dividend income investors receive for each dollar invested in a stock. It's vital for assessing the income-generating capability of an investment and comparing it to alternatives within the same industry.

Occidental Petroleum's (OXY) current dividend yield of 1.2058% is markedly lower than the industry average of 12.75%. Over the past 20 years, OXY's dividend yield has varied, peaking at 7.6195% in 2019 and dropping as low as 0.138% in 2020. Recently, the yield has hovered below 1.5%, indicating a downtrend. This lower-than-average yield could be deemed unattractive for yield-focused investors compared to industry counterparts. This suggests that the company might be prioritizing other uses of capital over dividend payments, potentially reflecting a different strategic focus.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage growth rate of the company's dividend payments over a specific period, in this case, the last 20 years. A growth rate higher than 5% is a positive indicator of financial health and a commitment to returning value to shareholders.

The dividend growth rate for Occidental Petroleum (OXY) over the last 20 years has exhibited significant fluctuation. With dividend per share ratios varying widely—from as low as 1.3245 in 2017 to a high of 1200 in 2022—the average dividend ratio stands at 60.67. While the wide swings could be attributed to various economic or company-specific circumstances, calculating the compound annual growth rate (CAGR) can provide more insights. Given the varied numbers, it's essential to delve deeper into specific years when notable changes occurred (e.g., 2020's significant drop to -73.8854 and a spike in 2022 to 1200). Overall, the substantial deviations imply unstable dividend growth, which could be a concern if predictability and steady income are priorities. Updating these ratios for more current years and analyzing their stability would be crucial for thorough analysis.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for Occidental Petroleum (OXY) and why it is important to consider

The Average Payout Ratio represents the percentage of net earnings distributed to shareholders in the form of dividends. A lower payout ratio typically indicates that the company has ample room to maintain dividend payments even during profit downturns. It highlights financial resilience and a conservative approach to dividend policy, ensuring that the company can rebuild reserves or reinvest profits back into the business.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

Analyzing the historical data from 2003 to 2023, it appears that, on average, Occidental Petroleum (OXY) has struggled to consistently cover its dividends with its earnings per share (EPS). The ratio of dividends per share covered by EPS has fluctuated significantly, indicating periods of both strong coverage and severe underperformance. For instance, the ratios in 2015 (-0.290), 2016 (-4.019), and 2020 (-0.051) highlight significant under-coverage, while only a few years, such as 2019 (0.573) and 2022 (0.036), indicate reasonable coverage. Such inconsistency is problematic for long-term dividend reliability and could make investors wary. Periods of underperformance, particularly during economic downturns as seen in oil price crashes, often lead to dividend cuts or suspensions, reflecting directly in OXY's drastic reductions in dividends per share post-2019. Overall, the trend shows a struggle in maintaining dividend consistency and reliability.

Dividends Well Covered by Cash Flow?

Dividends covered by cash flow is key as it gauges if cash profits are sufficient to cover payouts, ensuring sustainability. A ratio above 1 indicates good coverage.

Occidental Petroleum's dividends were not consistently well covered by free cash flow over the last two decades. Significant fluctuations are seen, with 2009 (-0.90), 2021 (0.11), and 2022 (0.10) showing poor coverage. Particularly troubling is that a negative coverage in 2015 implies that the company could not cover its dividends from its free cash flow and might have relied on debt or reserves. A coverage above 1 appeared sporadically, in 2016 (4.18) and 2019 (4.64), indicating better financial health for those years. Executing payout reductions or improving free cash flow are strategies Occidental might consider for stable dividend coverage. This trend forecasts sustainability concerns and underscores a need for monitoring closely.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years means dividends per share did not drop by more than 20%, key for income investors.

Examining Occidental Petroleum’s dividend history, the data shows overall growth from 2003 to 2019, with dividends rising from $0.4982 per share in 2003 to $3.14 in 2019. However, there were significant drops in 2020 and 2021, with dividends falling to $0.82 and $0.04 respectively, marking drops well over 20%. This decline indicates instability during those years, likely driven by market conditions or company-specific issues. Such volatility is concerning for income-seeking investors who prioritize stable dividends over the long term.

Dividends Paid for Over 25 Years?

One key metric to assess the stability and reliability of a company's dividend is its track record of paying dividends consistently over an extended period, typically 25 years. This historical performance provides confidence to investors regarding the company's commitment to returning value to shareholders, even during economic downturns.

Occidental Petroleum (OXY) has an impressive history of paying dividends for over 25 years. The data from 1998 to 2023 shows not only stability but also significant growth in the dividends paid per share over time. In 1998, the dividend stood at $0.479 per share, which increased consistently, reaching a peak of $3.14 in 2019. However, a notable dip occurred in 2020 and 2021, where the dividend dropped to $0.82 and later to $0.04, likely due to the COVID-19 pandemic's impact on the energy sector. The recovery trend post-2021 is promising, with dividends rising again to $0.52 in 2022 and $0.72 in 2023. This recovery trend is beneficial as it re-establishes investor confidence. In conclusion, despite the temporary setback, the long-term trend shows a strong commitment by Occidental Petroleum to return value to its shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Occidental Petroleum (OXY) and why it is important to consider.

An analysis of stock repurchases over the last 20 years shows that Occidental Petroleum (OXY) has consistently bought back shares in several years, including 2007, 2008, 2009, 2011, 2012, 2013, 2014, 2015, 2016, 2018, 2022, and 2023. The number of shares outstanding has fluctuated but generally trended downward from 777 million in 2003 to 889 million in 2023, with an average repurchase effectiveness of 0.7458. This indicates a commitment to returning capital to shareholders, which is positive. Occasional increases in outstanding shares, most notably in 2016 and 2020, slightly dampen the general trend but do not outweighed the overall buyback strategy.