Devon Energy Corporation (NYSE: DVN)
With a $50 billion market cap, Devon is one of the United States' leading independent oil and gas exploration companies, with operations in Texas, Oklahoma, North Dakota, and Wyoming. With everyone watching oil stocks right now, Devon Energy Corporation has increased by a mighty 172.71% over the last day, encouraging investors to look into what made Devon Energy so positively hyped. Currently, shares of Devon are trading for $74.06.
There are numerous reasons that sparked Devon Energy’s increase in positive hype, some of them are here.
First, Devon isn’t just restricted to a set quarterly payout, the company uses a fixed-plus-variable dividend payout system and for the most recent quarter, has increased this to $1.27, representing a 27% hike from its previous payout.
The company also increased its share repurchase program to $2 billion from $1.5 billion and has bought back $891 million worth of shares with its current buyback program.
It will grow its earnings and free cash flow by 3% to 5% per share in the first year overall. The management has also stated that it will continue to be improving its balance sheet over the year and has used some of this to add more fuel for the dividend by agreeing to purchase additional oil-producing land in North Dakota.
Devon has also seen an improvement in financial status. Net income in the first quarter more than quadrupled to $1 billion, and the company’s FCF shot up to $1.3 billion from just about $93 million in the year-ago quarter.
In addition, Devon Energy is currently trading at 14.6 times trailing earnings -- a discount to its five-year average price-to-earnings (P/E) ratio of 32.3.
Although Devon it seems like a good idea to take a position in Devon Energy right now, here are some reasons not to do so that you might want to take into consideration.
Devon’s shares have soared in price by 33% and this high stock price could possibly translate into a lower dividend yield.
Considering the potential onslaught of a recession, there are chances of oil prices falling, and Devon's variable dividend will fall if oil prices do.
One of the reasons Devon’s profits went up so much is because of rising oil prices, which implies that when they go down Devon’s cashflows will decrease significantly.
Devon is in quite a strong position at the moment and has managed to make great use of the oil price surge by returning capital to its shareholders. As long as Devon continues to benefit from the surge in oil prices, the company will not decrease in value too greatly. However, when this does occur, might want to reconsider your position. If you’d like to receive more trending stocks direct to your inbox, check out our premium plans. Alternatively, if you’d like to learn more about the services offered by HypeIndex, check out our FAQ page.
HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.