Diamondback Stock Jumps. Its Dividend Increase Is ‘Hard to Ignore.’

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Diamondback

Energy surged on Tuesday after the oil explorer said it would increase its base dividends from $2.80 to $3 per common share annually, a 7.1% jump, beginning at the end of the month. The implied annual dividend yield is 2.5%, based on Friday’s closing price. 

The company will also continue the common stock repurchase program it started in September last year. Diamondback (FANG) has bought back approximately $690 million worth of shares and plans to spend up to $2 billion. 

“The increased return of capital framework announced today displays the confidence we have in our forward outlook,” Diamondback CEO Travis Stice, said in a statement. He also expressed confidence that the company’s “strong balance sheet can withstand another down cycle.”

To David Deckelbaum and Kathy Yang of Cowen Equity Research, all this seems “hard to ignore.” The analysts note that the 75% return to capital payout places Diamondback at par only with

Pioneer Natural Resources

(PXD)–and ahead of the 50% payout offered by

Coterra Energy

(CTRA) and

Devon Energy

(DVN). 

Diamondback stock gained 8.2% today, while Pioneer Natural Resources rose 7.1%, Coterra advanced 3.9%, and Devon Energy finished up 4.4% as the energy sector rebounded. The

Energy Select Sector SPDR ETF
(XLE) jumped 5.2%.

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