Diamondback Energy raises dividend by 7.1% and return of capital to at least 75% of free cash flow
Diamondback Energy (NASDAQ:FANG) announced that the company has approved an increase to its return of capital commitment to at least 75% of free cash flow, from its previous commitment of at least 50% of free cash flow, at the beginning of Q3.
The company also announced its intention to increase its base dividend to $3.00 per common share annually ($0.75 per quarter) beginning 2Q22, representing a 7.1% increase from prior annual base dividend of $2.80 per share ($0.70 per quarter) and implies a 2.5% annualized yield based on the June 17, 2022 closing share price of $122.29.
For 2Q22, the company plans to maintain its 1Q22 base-plus-variable dividend payout of $3.05 per share, which implies a 10.0% annualized yield based on the June 17, 2022 closing share price of $122.29.
The company expects that the combination of these stock repurchases together with its expected base-plus-variable dividends for the quarter will constitute a return of capital to stockholders well in excess of 50% of Diamondbackâs Free Cash Flow as the second quarter has not yet ended.
CEO comment: "We have continued to use cash on hand to pay down debt and believe that we now have a strong balance sheet that can withstand another down cycle. The increased return of capital framework announced today displays the confidence we have in our forward outlook, with our high cash margins and low-cost structure driving an increasing return on capital. Going forward, we will continue to remain flexible, using a combination of our growing and sustainable base dividend, variable dividend and opportunistic share repurchase program to generate the highest value proposition for our shareholders.â
Till date, the company has repurchased 6,151,038 shares of common stock at an average share price of $112.20 for a total cost of approximately $690M under the current $2B buyback program announced on September 15, 2021 and repurchased 1,966,516 shares of its common stock for approximately $253M to date during Q2 at a weighted average price of ~$128.42 per share.
Shares up 2.5% PM and +11.5% since the start of 2022.
Read the most recent analysis on the stock here.