IB Net Payout Yields Model

ConocoPhillips Didn't Deliver The Goods

  • ConocoPhillips provided investors with the 2016 capital budget and operating plan.
  • The company remains solidly focused on paying the dividend with no intent to curtail production.
  • The recommendation remains to avoid the stock until the priority is to focus on the business and not sending cash to shareholders that isn't earned.

With the new competitive environment in the commodity energy business, a company needs ultimate flexibility to build for the future. One of the biggest problems with capital intensive businesses is that volatile commodity prices make dividend payments to shareholders difficult during the lean years. A company must either borrow debt, sell assets at the bottom of the cycle, or cut capital spending to the bone to cover the cash payments. Neither is a good option and the latter two hurt the business over the long run.

Read the full article on Seeking Alpha.

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