A dividend increase can be great news for investors. It’s a sign of success and that a business is healthy. For shareholders of the company, it means they will be collecting more in dividends than before. That means earning more cash as a percentage of your original investment. Companies that routinely increase their dividend payments and that have bright futures can incentivize investors to buy and hold their stock for many years.
Oil and gas company Cenovus Energy (TSX:CVE)(NYSE:CVE) recently announced that it wasn’t just bumping its dividend by a few percentage points. Last week, it said it would be tripling its payouts. The company is focusing on returning funds to shareholders as it has been reducing its debt load. CEO Alex Pourbaix stated that “After rapidly deleveraging our balance sheet, we are now able to provide a much clearer picture of how we will position Cenovus for the longer term – as a leader in delivering total shareholder returns.”
Prior to the announcement, the company had been paying shareholders $0.14 annually but now, they’ll be receiving $0.42. The updated dividend yield is now around 1.8%. It’s not the highest yield around, but it’s a big increase nonetheless for Cenovus. Cenovus and other oil and gas companies have benefitted from rising commodity prices this year and the company believes it can it sustain the payout even if the price of West Texas Intermediate (WTI) falls to US$45/barrel. Today, WTI, is more than double that at over US$100/barrel.
If your primary objective is to own a top-yielding dividend stock, there are going to be better options out there than Cenovus. But if you’re also looking for some growth opportunities, particularly in the oil and gas industry, this can be a promising stock to hold right now.
