With a robust portfolio of upstream assets located in the United States, Middle East, and Latin America as well as a strong pipeline business, Occidental Petroleum (OXY 1.41%) stands as a leading energy stock and one of the core holdings in the Berkshire Hathaway portfolio. In fact, Occidental Petroleum provides about $56 million ($224 million annualized) in quarterly dividend income to Berkshire Hathaway from its ownership of the energy company's common stock alone.
But just because the stock has received the Warren Buffett seal of approval doesn't make it an automatic buy. Let's investigate the dividend a little further for a better understanding of the payout.
This dividend is secure thanks to strong free cash flow
Driven by strong performance from its U.S. onshore assets as well as its midstream and OxyChem businesses, Occidental Petroleum reported free cash flow of more than $700 million in the first quarter of 2024. This more than covered the $332 million that the company paid out in dividends on its common and preferred stocks. The quarterly dividend payment on its common stock totaled $0.22 per share in the first quarter, and it will be the same for the upcoming dividend payment on Oct. 15. Currently, this translates to a forward dividend yield of about 1.5% for Occidental Petroleum stock.
This Q1 2024 performance was hardly a flash in the pan for the company. In 2023, Occidental reported $5.5 billion in free cash flow, adequately covering the $1.3 billion that it paid out in total dividends. Management foresees strong free cash flow generation in the days ahead following the CrownRock acquisition, which is expected to close in the third quarter of 2024.
Should income investors gas up on Occidental Petroleum stock?
Although its dividend yield isn't as high as that of some of its oil and gas dividend-paying peers, Occidental Petroleum is worth consideration for those looking to boost their passive income. Prospective investors should check in with the company's reporting of its financial results on Aug. 7, though, for greater insight into the company's finances.
