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Duh ?Where were these geniuses when XOM was yielding 11% ? DJ Why Yield-Hungry Investors Are Looking to Energy Stocks -- Barrons.com Avi Salzman The dividend yield on the S&P 500 has fallen over the past year, making the average stock pay out even less than the 10-year Treasury note. But in one sector, dividends remain plump, and may be attractive to investors who are tired of hunting for cash in the bond market or traditionally generous sectors such as utilities. The big winner right now is energy. The SPDR S&P 500 Energy Sector ETF (ticker: XLE) is now yielding 3.7%. That's substantially above the two sectors that are tied for second-highest -- real estate and utilities -- which pay out 2.9%. The average figure for the S&P 500, meanwhile, was 1.3%, based on the payout over the past four quarters, while the 10-year Treasury yield was recently at 1.56%. Energy stocks have room to return even more cash, according to DataTrek Research. Oil and natural gas are under pressure from climate regulations around the world, but demand shows no sign of fading yet. Prices for both commodities are rising and most analysts expect them to stay strong. Some investors are even betting that oil prices can eclipse $100 per barrel by the end of next year, a gamble that would have been unthinkable a year ago. The rally means that the companies are likely to have even more cash to deploy over the next year. "In 2019, for example, XLE's quarterly dividend averaged 8 percent higher than today's payout while West Texas Intermediate crude (WTI) was actually lower than today's levels," wrote Nicholas Colas, co-founder of DataTrek. "While the sector is only 2.9 percent of the S&P, which may limit how much of an overweight many investors can have, those looking for decent yields should consider this sector." In the past few months, several oil-and-gas companies have increased their dividends, issued special dividends, or initiated policies meant to give more back to shareholders. Shale producer Devon Energy (DVN), for instance, has begun issuing variable dividends. They work like this. Devon pays a fixed dividend that now offers a 1.5% yield. On top of that, the company pays a variable dividend worth as much as 50% of the additional excess free cash flow the company produces once it funds the fixed payout. After its first-quarter earnings report, the company forecast a dividend yield of more than 7% for 2021 if current trends hold. Pioneer Natural Resources (PXD) will institute a similar policy in 2022, and others such as Cimarex (XEC) and EQT (EQT) are considering it. Meanwhile, tried-and-true dividend payers are looking more solid. Exxon Mobil (XOM), for instance, is now able to cover its dividend payments from operating cash flow. And analysts are starting to forecast that Exxon will even increase the dividend this year. Write to Avi Salzman at avi.salzman@barrons.com (END) Dow Jones Newswires 06-16-21 1625ET Copyright (c) 2021 Dow Jones & Company, Inc. |
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Msg # | Subject | Author | Recs | Date Posted |
333917 | Re: Duh ? | Naamkat | 0 | 6/16/2021 5:30:32 PM |