Devon Energy Corp (DVN), Chesapeake Energy Corporation (CHK): 1 Great Dividend You Can Buy Right Now

Page 1 of 2

Dividend stocks are everywhere, but many just down right stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn’t sustainable. In others, the dividend is so low, it’s not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we’re going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn’t to say that these stocks don’t share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week’s selection.

This week, we’ll turn our attention to domestic oil and gas exploration and production (E&P) company, Devon Energy Corp (NYSE:DVN).

Feeling a bit gassy
That’s right, I’m featuring a company with large natural gas deposits and a current 1.5% yield as a great dividend play you can buy right now. Go on, get all the head-scratching and jokes out of the way now, because you might be climbing over each other to dig deeper into Devon by the time I’m done.

As you are probably well aware, the biggest challenge to Devon Energy Corp (NYSE:DVN) and much of the natural gas-heavy E&P drillers has been the volatile prices of the commodities they produce. Very large onshore shale finds over the past decade have dramatically increased natural gas surpluses and — for lack of a better word — tanked nat-gas spot prices. The end result is that companies that were heavily reliant on natural gas for their production have had to shift gears and focus on liquid fuels in order to prosper.

For some natural gas companies, this wasn’t an easy transition. Chesapeake Energy Corporation (NYSE:CHK), for instance, didn’t even have enough cash on hand to cover its capital expenditures and operating expenses for 2013, which necessitated the sale of $6.9 billion worth of Permian Basin assets to Chevron Corporation (NYSE:CVX) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A). For Chesapeake, which really didn’t have much choice, it gives the company breathing room, while a behemoth like Chevron was able to pick up natural gas-heavy assets for an incredibly competitive price.

EnCana Corporation (NYSE:ECA), the Canadian equivalent to Chesapeake, has had it a bit easier, although it essentially took the same route as Chesapeake Energy Corporation (NYSE:CHK) in terms of a vastly reduced dry gas capital expenditure budget and asset sales in order to boost its cash on hand. EnCana sold a 40% stake in undeveloped assets in British Columbia to Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) early last year, netting $2.9 billion.

For Devon Energy, the process has been considerably easier for a number of reasons.

The Devon advantage
First and foremost, Devon is a mastermind when it comes to striking beneficial joint ventures. No E&P company likes giving up working interests in lucrative fields, but when it comes down to it, Devon Energy Corp (NYSE:DVN) can use the upfront cash payments to pay down a good chunk of its operating and drilling expenses. This is what it did recently when it received $1.4 billion from Sumitomo, which, in exchange for the payment, received a 30% working interest in Devon’s Cline Shale and Midland-Wolfcamp Shale acreage.

Second, Devon has made a nearly seamless transition toward higher liquids production. Although this doesn’t set Devon apart from the trend that we’ve seen throughout the sector, unlike some E&P companies, Devon does have the oil reserves to support increased production. In 2012, Devon Energy Corp (NYSE:DVN) boosted its oil production by 13%, relying on greater efficiency, the addition of wells in the Permian Basin — which boosted oil production by a whopping 31% — and cash from its joint ventures to drive production growth. Devon also boosted its oil reserves by 13% and projects a 12-year lifespan based on existing proven reserves.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!