ConocoPhillips: A Dividend’s Peculiar Journey

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The pursuit of wealth, a most curious and often lamentable undertaking. For half a century, those who have diligently tracked the comings and goings of dividends within the S&P 500 have observed a pattern. Those companies which, with a certain regularity, augment their payouts to shareholders, have, on average, yielded a return of 10.2% annually. A figure not entirely insignificant, and one which dwarfs the paltry returns of those who either abstain from such generosity or offer only a static pittance. The non-dividend payers, alas, linger in the shadows, their coffers seemingly untouched by the spirit of distribution. A most peculiar state of affairs, wouldn’t you agree?

Now, consider the behemoth, ConocoPhillips (COP +1.52%). This oil giant, a creature of considerable scale and ambition, harbors a desire to rank amongst the most generous of its peers – to ascend to the top 25% of dividend-growing companies within the aforementioned S&P 500. Already, it offers a yield of 3.3%, a sum nearly three times that of the average company – a veritable mountain of coin compared to the molehill offered by others. Should one invest a mere $1,000, one might anticipate a dividend income of over $33 in the first year. A sum sufficient, perhaps, to purchase a rather respectable samovar, or at least a generous quantity of tea.

A Machine of Peculiar Efficiency

In recent years, ConocoPhillips has demonstrated a remarkable aptitude for augmenting its dividend. Each year, like clockwork, the base payment has increased, a steady drip of prosperity. The increases have been… substantial. 8% in 2025, a rather modest increment, followed by a startling 34% in 2024, and a respectable 14% in 2023. And then, a curious addition: variable dividends, initially a temporary measure, were made permanent with the aforementioned boost in 2024. A most unusual decision, one might suspect, born of either exceptional foresight or a desperate attempt to appease the shareholders.

The company professes its intention to continue this upward trajectory, aiming to remain within the top quartile of dividend growers. And, indeed, it has largely succeeded. Over the past five years, the S&P 500 has managed a compound annual dividend growth of 5%. ConocoPhillips, however, has surpassed this, demonstrating a vigor that is… almost unsettling. One begins to wonder what dark pact has been made to ensure such consistent prosperity.

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Fueling the Machine: An Abundance of… Something

ConocoPhillips, it appears, remains well-positioned to continue its generous distribution. It possesses an abundance of low-cost oil and gas resources, a veritable ocean of subterranean wealth. The company can currently cover its capital expenditures even when oil prices languish in the mid-$40s. Adding the dividend to the equation increases this requirement by roughly $10 per barrel. With crude prices currently hovering around the $60 mark, the company generates a considerable surplus of free cash – a sum it then utilizes to repurchase its own shares, a practice that is, frankly, rather baffling. It is as if the company is attempting to consume itself, a slow and deliberate act of self-cannibalization.

The company anticipates that its breakeven level will fall significantly in the coming years, as it completes its current slate of long-term capital projects. These projects include investments in liquefied natural gas (LNG) facilities and the Willow Oil project in Alaska – ventures that promise to add an incremental $6 billion to its annual free cash flow by 2029, assuming oil remains around $60 a barrel. A considerable sum, indeed, particularly when one considers that it generated $6.1 billion in free cash flow through the first nine months of last year. This will further reduce its already low breakeven level to the low $30s by 2029, bolstering its ability to increase its dividend – a virtuous cycle, perhaps, or a descent into madness.

A Yield and a Growth: A Peculiar Combination

ConocoPhillips offers investors a high-yielding dividend, coupled with an expectation of above-average growth. This combination, if realized, should provide robust total returns. This peculiar blend of income and growth makes ConocoPhillips, in the eyes of some, the ultimate dividend growth stock to acquire at this juncture. A bold claim, perhaps, but one that is, in the grand scheme of things, as absurd as any other.

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2026-01-24 22:32