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However, the company had to lower its dividend to 49 cents per quarter from 72 cents the prior quarter.
Nevertheless, its dividend yield is still very attractive. At $50.00 today, DVN stock trades with an annualized yield of 3.92% (i.e., $1.96/$50.00).
Fixed and Variable Dividend
Investors can feel more secure that this dividend may be more sustainable. This is because the company's free cash flow, which funds the dividend, looks to be more secure.
For example, the quarterly dividend is split between a fixed component and a variable portion. The variable dividend is from 50% of the adjusted excess free cash flow, after fixed dividend payments, generated during the quarter.
For example, this quarter Devon paid 20 cents in a fixed dividend and 29 cents in a variable dividend, for a total of 49 cents.
The variable dividend was calculated after deducting 50% of the excess free cash flow generated from oil and gas cash flows.
The company's CEO said this was the 12th consecutive quarter that Devon had made positive FCF. Moreover, Devon Energy spent $228 million on share buybacks.
That means that total shareholder returns were $690 million, or 2.1% quarterly or 8.4% annualized, compared to its $32 billion market capitalization.
In other words, shareholder returns should approach at least 8.0% annually, given its dividends and buybacks. That makes DVN stock attractive to value investors in the long run.
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