Occidental Petroleum Expects Its Dividend to Continue Surging

Occidental Petroleum (NYSE: OXY) has finally gotten back on track this year, largely thanks to surging oil prices. The company produced a record $4.2 billion of free cash flow in the second quarter. That enabled the oil giant to pay off more debt, positioning it to start returning more cash to shareholders.

The company expects to send a significant amount of cash to its investors over the coming years through share repurchases and a rapidly rising dividend. That will make it a more compelling option for dividend-focused investors.

A monster raise with more to come

Occidental Petroleum has been working hard to reduce debt following its acquisition of Anadarko Petroleum in 2019. It sold assets, slashed its dividend payment, and suspended its share repurchase program to allocate more cash toward debt reduction. The company set a goal to pay off another $5 billion of debt this year.

It blew past that target, paying off over $8 billion by the second quarter. That enabled Occidental to start returning more cash to shareholders above its paltry $0.01 per share quarterly dividend. It gave investors an enormous 1,200% raise, boosting the payout to $0.13 per share each quarter, and initiated a $3 billion share repurchase program.

That's only the beginning of the company's capital return plans. CEO Vicki Hollub outlined them on the second-quarter conference call. She noted the company's near-term priorities are to complete its current share repurchase authorization -- it bought back $1.1 billion of shares in the second quarter -- and reduce gross debt to the high teens by year-end. That will reduce its shares outstanding and interest payments, enhancing the sustainability of our dividend and position us to increase our common dividend at the appropriate time, according to Hollub.