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Diamondback (FANG) to Further Augment Shareholder Returns

Zacks Equity Research
·3-min read

Diamondback Energy Inc. FANG recently announced that it intends to increase capital returns to stockholders.

The Midland, TX-based independent energy firm stated that its board approved a hike in shareholder returns to no less than 75% of free cash flow, beginning in the third quarter, up from its previous commitment of a return of at least 50% of free cash flow.

To begin with, Diamondback stated that it would increase its base annual dividend, starting with the second-quarter payout by 7.1% to $3 per share (75 cents quarterly) from the previous figure of $2.80 annually (70 cents quarterly). This implies a 2.5% annualized dividend yield based on the Jun 17, 2022 closing share price of $122.29.

Moreover, the company mentioned that it would continue to complement the base dividend with variable dividends and stock buybacks. For the second quarter of 2022, FANG plans to stick with its first-quarter base-plus-variable dividend payout of $3.05 per share, implying a 10.0% annualized yield based on the company’s closing share price on Jun 17, 2022.

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Having repurchased shares worth about $253 million in the second quarter, which has not ended yet, Diamondback anticipates that this stock buyback, along with its expected base-plus-variable dividends for the quarter, will constitute a return of capital to shareholders easily more than 50% of the company’s free cash flow for the second quarter.

Sharp gains from oil prices to more than $100 a barrel enabled energy companies to generate strong revenues in the recent past. Strong commodity prices and a bullish demand picture pushed up free cash flow, which has allowed energy operators to step up shareholder distributions in the form of dividends and buybacks.

The Chairman and Chief Executive Officer of Diamondback, Travis Stice, mentioned that he was pleased to announce the company’s improved capital return structure. “This is a natural progression of our shareholder returns program that began with the initiation of our base dividend in 2018, which has been increased 500% since then and continues to deliver significant value to our stockholders,” he added.

Founded in 2007, Diamondback Energy, Inc. is an independent oil and gas exploration & production company with its primary focus on the Permian Basin, where it has around 414,000 net acres. Its activities are concentrated in the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations. The upstream operator focuses on growth through a combination of acquisitions and active drilling in America's hottest and lowest-cost shale regions.

Diamondback currently has a Zacks Rank #3 (Hold). Those interested in the energy sector might want to look at some better-ranked stocks. HighPeak Energy HPK, Marathon Petroleum MPC and CNX Resources CNX each sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HighPeak’s 2022 earnings has been revised about 22% upward over the past 60 days from $4.01 per share to $4.89.

The Zacks Consensus Estimate for HPK’s 2022 earnings is pegged at $4.89 per share, up 640.9% from the projected year-ago earnings of 66 cents.

Marathon Petroleum beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 65%.

The Zacks Consensus Estimate for MPC’s 2022 earnings is projected at $13.72 per share, up approximately 460% from the projected year-ago earnings of $2.45.

The Zacks Consensus Estimate for CNX Resources’ 2022 earnings is pegged at $3 per share, up 86.3% from the projected year-ago earnings of $1.61.

The Zacks Consensus Estimate for CNX’s 2022 earnings has been revised about 31% upward over the past 60 days from $2.29 per share to $3.


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