This Ultra-High-Yield Oil Stock Is Adding More Fuel to Grow Its Dividend
Diamondback Energy (NASDAQ: FANG) has become a big-time dividend stock in recent years. The oil company has grown its base dividend at an industry-leading 11% average quarterly compound annual rate since it launched the payout in 2018, including increasing it by 67% over the past year. In addition, it has started paying variable dividends from its oil-fueled cash flows. Those two payments have boosted the company's annualized dividend yield to 9.5%.
While Diamondback Energy's variable dividend will ebb and flow with oil prices, the oil stock recently made a deal to bolster its ability to produce free cash and pay dividends. That adds to its appeal for investors seeking to cash in on the current strong oil market.
Diamondback Energy has agreed to purchase the leasehold interest and related assets of Firebird Energy. It's paying $775 million in cash and issuing 5.86 million shares to the seller (valued at about $811 million). That values Firebird Energy at three times its projected 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA) and a 15% free cash flow yield at the current projection for oil prices. That's a good price, given how wildly undervalued oil stocks are these days at $90 oil.
Source Fool.com
