Performance of Conoco’s Dividends

ConocoPhillips Corporation is a multinational energy corporation based in America. The company’s headquarter is in Houston, United States. The corporation is known as the world’s largest independent exploration and production and manufacturing company. The company is a result of amalgamation of Conoco Inc. and Phillips Petroleum Co. which happened in 2002. ConocoPhillipsstocks are on a rise and the company’s current stock price is $83.08 after increasing by 0.27%.

Despite of having strong market share in recent times, many analysts believe that Conoco shares will be a tricky dividend stocks for the investors in the upcoming years. Few reasons as to why the company’s dividend stock will be tricky in the near future are as follows:

1)      The company has held the dividend rate at $2.64 and raising its payout ratio to 44% of net profits after dilating Phillips Co.

2)      Conoco is trying further to reduce the payout ratio and bring it down to 25% to 30% in the long run.

3)      Analysts believe that earnings per share will surpass and increasing faster than the dividends.

The management of Conoco made a crucial decision to hold their dividend rate at $2.64 per share. This decision was in favor of Conoco after splitting with Phillips 66 in 2012. Conoco effectively raised the dividend payout to 44% in 2012 after the spinoff while keeping the payout steady. The company’s desire is to bring down the payout ratio to 25% to 30%. It will be easy for Conoco as it is an exploration and production company.

Hence, Conoco stocks are being considered as tricky for the upcoming years as it is believed that the profit growth of the company will be quite adequate overall. However, the dividend rate and growth of the company will be much lower as compared to the profit growth. Therefore, to sum things up, predictions are that Conoco can be rated as HOLD for the next five years which will be beneficial for the investors as well. But there is no steady 8% to 12% annual dividend growth guaranteed in the near future.

At some points, Conoco stock is handling things nicely as the company increased limits of its projects. Moreover, the company increased rates of production as well which is a very good initiative taken by an oil company.

Hence in a nutshell, the net profit margins of Conoco have been increasing efficiently in the current fiscal year by increasing the production by 38%.  The moment till Phillips 66 was incorporated with Conoco; the net margins were in between 6% to 8% range. After spinning off Phillips 66, the company has increased the net profit margins to 12-14%. Therefore, Conoco will be an excellent resource one can own.