Energy Giants Can Keep Paying Dividends Even at $40 Oil

The recent surge in oil prices has raised concerns about dividend cuts for energy companies. However, some investors may be surprised to learn that several major players can maintain their payouts even if oil prices drop.

Occidental Petroleum (OXY) is one such company. With a low trailing payout ratio of 30%, Oxy can raise its dividend annually for the foreseeable future. It only needs WTI crude oil prices to stay above $40 per barrel, which is its corporate breakeven price, to support its capex and dividends.

ExxonMobil (XOM), another major player in the energy sector, has a similar ability to maintain its dividend payments. With a trailing payout ratio of 53%, ExxonMobil can cover its capex and dividends even if Brent crude oil prices drop below $35 per barrel. The company plans to increase its oil and gas production by nearly 3% annually through 2030.

Energy Transfer (ET), which operates over 140,000 miles of pipeline across 44 states, is also well-positioned to maintain its dividend payments. As a midstream company, Energy Transfer collects 'tolls' from upstream and downstream companies that transport resources through its pipelines, making it naturally insulated from volatile commodity prices.