Occidental Petroleum: Insights into Dividend Performance and Risks

Investors should consider reassessing their positions in Occidental Petroleum. With a relatively low dividend yield and a weak historical dividend performance, alternatives like Chevron and Enterprise Products Partners might present better opportunities.

Date: 23-04-2025

AI Rating: 5

Occidental Petroleum (OXY) faces significant scrutiny due to its comparatively low dividend yield of 2.5%, which falls short of the energy industry average of approximately 3.1%. This yield has been adversely affected by a dividend cut in 2020, attributed to the impacts of the COVID-19 pandemic on oil prices and a compromised balance sheet post a major acquisition financed by Berkshire Hathaway.

Dividend Yield and Shareholder Appeal: The modest yield exacerbates the issue for dividend investors, especially when positioned against alternatives such as Chevron (CVX), which offers a robust 5% yield and a consistent dividend increase record over 38 years. The contrast is stark, as Chevron maintains a significantly healthier debt-to-equity ratio of 0.15x compared to Oxy's 0.75x, showcasing stronger financial stability and operational resilience. This enhances Chevron’s attractiveness, particularly while investing alongside a celebrated figure like Warren Buffett.

Alternative Investment Considerations: Another appealing option is Enterprise Products Partners (EPD), renowned for its high-yield distribution of 6.9% and a consistent history of distribution growth for 26 consecutive years. Such performance in the midstream sector offers greater reliability to investors focused on income generation.

While Buffett’s association with Occidental does garner attention, dividend investors should prioritize dependable income streams and carefully evaluate the inherent risks associated with Oxy's recent financial history.

Stocks: OXY CVX EPD