Devon Energy Corporation (NYSE: DVN) is a US energy company involved in oil and gas exploration, production, and transportation. DVN has a long-standing history, founded in the 1970s and at one point had significant international assets. However, in recent years the firm has focused on streamlining their efforts back to their core market. Energy stocks overall have gained strong momentum in the last 6-12 months, benefitting from a global rise in commodity market prices.
2021 was a big year for Devon, as their stock was trading at ~$15 in Jan 21 and ended the year at ~$45, representing a 180% return for shareholders. We are now approaching the $50 mark and there are few signs of the stock slowing down, despite the recent market volatility around the Omicron variant and the FED’s monetary policy outlook.
Dividend yield leader
DVN has been on our radar for some time thanks to our weekly dividend yield analysis. The stock boasts a very impressive 7.1% dividend yield, ranking 4th highest across US stocks.
Dividend yield is a key ratio, which represents the stock’s latest annual dividend as a percentage of the current stock price. A high dividend yield means that there is a strong income return element regardless of how the company will perform in the short to medium-term. If the stock is able to continue its positive trajectory, shareholders will receive a double gain of 1) Income Return from the stable and consistent dividend payout to shareholders, and 2) Price Return from any increase in the stock price.
Earnings slumped significantly during 2020 but have picked up aggressively in 2021. The latest quarterly revenues hit $3.5B in Q3, in contrast to $2.4B in Q2, and $1.8B in Q1. This growth in profitability has contributed to the company announcing a $1 billion stock buyback programme throughout 2022. Repurchasing their shares in the open market should boost the stock price and result in additional returns for the shareholders. Buybacks are generally also seen as a sign that company management believe that their shares are under-valued at current levels and are a good investment for the long-term.
Wall Street support
Despite the strong outperformance in 2021, Wall Street analysts remain bullish on the stock. 82% of analysts surveyed by Bloomberg currently have a “BUY” rating, whilst 18% have a “HOLD” (neutral) rating. This is significant as currently no analysts have issued a “SELL” rating.
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