A Dividend Gem in the Oil Patch
Are you searching for a reliable way to generate passive income? In a world of volatile markets, finding a stock that not only pays you consistently but also has a proven track record can feel like searching for a diamond. Well, today we're going to look at a gem in the energy sector that many investors are turning to for steady income. Let's dive into why EOG Resources (EOG) is considered a top crude oil stock for building a passive income stream.
When it comes to passive income, consistency is king. EOG Resources stands out with an incredible track record: 27 years of paying regular dividends without ever cutting them. Think about that for a moment. Through market booms and busts, oil price crashes, and global uncertainty, EOG has continued to reward its shareholders. This is extremely rare in the cyclical oil industry, where companies often have to slash dividends during downturns.
For example, many energy companies were forced to reduce or suspend their dividends during the 2020 oil price collapse. EOG's ability to maintain its payout demonstrates incredible financial strength and a deep commitment to its investors. This isn't just a company that pays a dividend; it's a company that has built its reputation on reliability.
A reliable dividend is great, but a growing dividend is even better! EOG Resources has grown its cash distributions twice as fast as its peers since 2019. But their shareholder-friendly policy doesn't stop there. The company has a stated goal of returning at least 70% of its annual free cash flow (FCF) to shareholders.
What does this mean for you? Free cash flow is the cash a company has left over after paying for its operating expenses and capital expenditures. By committing to return 70% of this, EOG is essentially saying, "When we profit, you profit." They often do this through special, one-time dividends on top of their regular ones. Imagine getting your expected quarterly payout and then receiving a surprise bonus check just because the company had a great year! This policy makes EOG a true partner in its own success.
A company can't pay dividends forever if it doesn't invest in its future. EOG Resources is making bold moves to ensure it can sustain and grow its payouts for years to come. In May, the company announced a $5.6 billion acquisition of Encino Acquisition Partners.
This massive deal gives EOG access to an additional 675,000 net core acres and over 1 billion barrels of undeveloped resources. The company expects this acquisition to immediately boost its free cash flow by 9%. And what was one of the first things they did with this anticipated growth? They proved their commitment to shareholders by bumping their quarterly dividend by 4.6% to $1.02 per share! This is a company that is actively investing in its growth engine to keep the passive income flowing.
Q1. What exactly does EOG Resources do?
A. EOG Resources, Inc. (NYSE:EOG) is one of the largest exploration and production companies for crude oil and natural gas. It primarily has operations in major basins across North America as well as in Trinidad and Tobago.
Q2. What is the current dividend yield for EOG?
A. Following the recent 4.6% increase, the new quarterly dividend is $1.02 per share. This brings its current annual dividend yield to approximately 3.35%. Remember, this figure can change with the stock price.
Q3. Is investing in an oil stock like EOG risky?
A. All investments carry risk, and the energy sector can be volatile due to changing oil prices and regulations. However, EOG mitigates this risk with its strong balance sheet, long history of reliable dividends, and strategic growth plans. While the original article notes that certain AI stocks might offer more upside, EOG is presented as a strong option specifically for those seeking stable and growing passive income.