Matt DiLallo, The Motley Fool
5 min read
In This Article:
-
EOG Resources has delivered more than a quarter-century of dividend stability and growth.
-
The oil company has grown its payout twice as fast as its peers in recent years.
-
Its recent acquisition will give it even more fuel to grow its dividend.
EOG Resources (NYSE: EOG) has an excellent record of paying dividends. The oil and gas producer has delivered 27 years of sustainable and growing dividends. While the company hasn't increased its payout every single year since its initial public offering, it has never reduced its payment, which is a rarity in the oil patch.
Further, it has grown its payout twice as fast as its peers since 2019. On top of that, EOG has paid several special dividends in recent years.
The oil stock recently added a lot more fuel to its dividend growth engine. It's buying Encino Acquisition Partners in a $5.6 billion deal that's so accretive that EOG is boosting its dividend payment by another 5%. That will further increase its already attractive yield of over 3.5%, more than double the S&P 500's (SNPINDEX: ^GSPC) 1.3% dividend yield.
Here's a closer look at the deal and why dividend investors should consider adding EOG Resources' high-octane payout to their income portfolio.
EOG Resources is one of the country's largest oil and gas producers. It has a multi-basin portfolio loaded with low-cost resources. The company estimates that it currently has over 10 billion barrels of oil equivalent (BOE) resources that it can tap into in the coming years.
The oil and gas producer has largely built its resource portfolio via organic exploration. Unlike others in the oil patch, EOG Resources prefers not to make corporate acquisitions because those tend to be more expensive. However, it will pounce on a deal when the right opportunity arises.
That recently happened. The company has agreed to buy Encino Acquisition Partners for $5.6 billion. Encino holds over 675,000 net acres in the Utica Shale play of Ohio. That deal significantly increases EOG's position in the play, which will have a combined 1.1 million net acres with an estimated 2 billion BOE of undeveloped net resources after the transaction closes. That will give the company a third foundational resource position alongside its assets in the Delaware Basin and Eagle Ford Shale in Texas.
EOG Resources expects the deal to be immediately accretive to its financial metrics. It sees the acquisition boosting its cash flow from operations and free cash flow by 9%. Given the largely undeveloped acreage, the deal should enhance the company's ability to grow its production in the coming years.
