Everyone loves gifts. But not everyone views corporations as gift givers. However, many companies do distribute monetary “gifts” to shareholders in the form of dividends. In fact, savvy investors know that some companies pay more than one type of dividend: usual dividends and special dividends.
Let’s talk about a business planned to pay an exceptional dividend: EOG Resources (NYSE: EOG).
Now, technically speaking, dividends are not gifts. They are the fulfillment of a promise. When you buy a share, you become a partial owner of the company and you get a (small) claim on the profits of this company. A dividend payment is a reward for your investment – your slice of the pie, so to speak. OWhen it comes to EOG, there are two types of dividends that the company pays: regular and special.
EOG pays a regular quarterly dividend of $0.75/share, for a total of $3.00/share per year. With EOG shares trading around $145, this translates to a dividend yield of 2.13%. However, EOG also declared a special dividend based on its abundant free cash flow. With EOG’s free cash flow increasing due to high oil and natural gas prices, the company announced it would pay a special dividend of $1.80/share to anyone holding stock on June 14. June. This date will serve as the ex-dividend date.
As you can see, total EOG dividend payouts have skyrocketed in recent years. The company’s trailing 12-month (TTM) dividend payouts are now up nearly 800% from their 2018 level.
What fuels these dividend payments are increased margins and higher free cash flow. During the pandemic, the company has focused on shutting down its costliest wells and those generating returns of 60% or more. As a result, EOG’s operating margin now stands at 43.15%, compared to a pandemic low of 4.64%. And as margins have skyrocketed, so has free cash flow. EOG reported $3.8 billion in free cash flow over the past twelve months, more than half of which was then returned to shareholders in the form of dividends and share buybacks.
Wall Street raises estimates for EOG
Dividends (regular and special) are great, but there are other reasons to love EOG. Consider this chart of recent earnings estimates.
|EOG Resources Earnings Estimates|
|Estimate time||Current quarter (June 2022)||Current year (2022)||Next Year (2023)|
|7 days ago||$4.19||$16.70||$14.90|
|30 days ago||$4.15||$16.06||$14.32|
|60 days ago||$3.71||$13.98||$12.79|
|90 days ago||$3.12||$12.18||$11.24|
Wall Street estimates for EOG earnings have skyrocketed over the past 90 days. For 2022, the consensus earnings per share (EPS) estimate is now $16.81, up $4.63 (38%) from three months ago. In a nutshell, analysts are scrambling to raise their forecasts as runaway oil and gas prices make oil and gas producers like EOG more profitable by the day.
Because of these higher estimates and its strong free cash flow, I’m bullish on EOG. If you’re an investor looking to add a US-based oil and gas producer, EOG is a name you should consider.
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Jake Lerch holds positions at EOG Resources. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.