Apache Corporation’s Current Dividend Yields 2.6% (APA)
By: Ned Piplovic,
The Apache Corporation (NYSE:APA) continues to reward its shareholders with a steady dividend income distribution, which currently offers a 2.6% yield.
While the share price has declined 26% over the past 12 months, some long-term investors might view the company’s steady dividend distribution, its low dividend payout ratio and its recent oil discovery announcement as sufficient indicators that this current price drop might be a buying opportunity.
Investors convinced that the Apache Corporation’s share price will continue the current uptrend should perform their own diligence to make sure that this company’s stock fits with their portfolio strategy and take a position prior to the company’s upcoming ex-dividend date on April 20, 2018, to ensure eligibility for the next round of dividend distributions on the May 22, 2018, pay date.
Apache Corporation (NYSE:APA)
Based in Houston, Texas, and founded in 1954, the Apache Corporation is an independent energy company that engages in exploration, development and production of natural gas, crude oil and natural gas liquids (NGLs). As of the end of 2017, the company had exploration assets in the United States, United Kingdom, North Sea and Egypt. The company has had drilling and extraction operations in Egypt for the past 22 years and in the North Sea for the past 15 years. On March 23, 2018, the company announced a significant oil discovery in the United Kingdom sector of the North Sea just four miles from one of company’s existing platforms. The early estimates are for recoverable reserves of 10 million barrels of light oil, which the company plans to start extracting in the first quarter of 2019. As of December 31, 2017, the company had total estimated proved reserves of more than 1.2 billion barrel of oil equivalent, including almost 600 million barrels of crude oil, more than 200 million barrels of NGLs and 2.3 trillion cubic feet of natural gas.
While the company’s share price experienced a moderate decline over the past 12 months, the share price trend over the long term is a steady rise. The company’s share price entered the current 12-month period on a downtrend that started in December 2016. Following a brief 3.6% rise in the first 10 days of April 2017, the company’s share price reached its 52-week high of $53.99 on April 10, 2017. After the peak in early April, the share price declined nearly 11% and closed at $48.08 on January 26, 2018. After this slow decline, the share price dropped more sharply and lost an additional 26% over the following 30 days to close on February 28, 2018, at its 52-week low of $34.15. However, after this sharp decline and a period of moderate volatility, the share price has risen almost 13% since its 52-week low and closed on April 2, 2018, at $37.90.
The company continues to distribute the same $0.25 quarterly distribution that it paid in the past 17 consecutive quarters. This quarterly payout is equivalent to a $1.00 annual distribution and currently yields 2.6%. The current yield level is almost 45% higher than the company’s own 1.8% average dividend yield over the past five years.
While paying only a flat annual dividend distribution over the past four years, the company hiked its annual dividend payment 12 times in the past two decades and avoided all dividend cuts over that period. Since 1998, the company boosted its annual dividend amount at an average rate of 11.1% per year. Because of this double-digit-percentage growth rate, the Apache Corporation enhanced its annual payout amount 725% over the past 20 years.
The company’s current yield lags approximately 18% behind the 3.18% average yield of all the companies in the Independent Oil & Gas market segment but is 5.2% above the 2.47% average yield of the entire Basic Materials sector. However, the company’s current Dividend Payout Ratio is only 29%, which is extremely low and indicates that the company should have no trouble keeping up its current dividend payout level and could even switch to a policy of rising annual dividends.
Over the past few years, the company reduced its foreign exposure and divested its entire Canadian operation in 2017, which boosted the company’s liquidity by more than $700 million. The company’s foreign operations generate a positive cash flow, which allows the company to operate its U.S. operations with a negative cash flow without jeopardizing its dividend distribution or its balance sheet while developing domestic exploration sites that should return a positive cash flow and drive share price growth going forward.
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