While Conoco is starting from a lower base, the drivers here are its major projects which will start to come on line over the next few years. These projects are in lower-risk geographies and are focused on liquids-rich opportunities, and will be the key drivers to deliver that future production growth.
Solid plan to grow the dividend
While Conoco plans to plow about $16 billion per year in future cash flow back into its business, that’s only 75%-80% of its expected cash flow. The 20%-25% left over is earmarked to reward investors through additional buybacks and dividends. Conoco already has a very compelling dividend that yields nearly 4.5%; however, as the company executes on its plan, it believes that dividend can begin to head higher in the future.
My Foolish take
While ConocoPhillips (NYSE:COP) has been one of my top energy holdings for years, I’ve never been more excited about its future as I am today. The formula here is a pretty simple; margin growth plus production growth equals higher shareholder returns. That’s why I think this company is no joke, and one you should consider if you want to add some energy to your portfolio.
The article 3 Reasons Why This Energy Stock Is No Joke originally appeared on Fool.com is written by Matt DiLallo.
Fool contributor Matt DiLallo owns shares of Phillips 66 and ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned.
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