Boosting its dividend at a 12% compound annual growth rate from 2013 through 2023, Phillips 66 (PSX 0.35%) is undeniably dedicated to rewarding shareholders. The energy company has consistently hiked its dividend payout, which makes it a compelling choice for investors looking to fuel their passive income with a reliable name from the oil patch. The stock's forward dividend yield of 3.5% also makes it a compelling option for income investors.
But smart investors know the danger of leaping into a dividend stock based solely on a couple of enticing numbers. Therefore, let's take a closer look at Phillips 66 and its dividend to see whether investors should consider clicking the buy button.
Generating strong cash flow from its diverse operations -- and passing it right to shareholders
Phillips 66 has come a long way from its first dividend payment of $0.20 per share in September 2012. In February 2024, Phillips 66 declared a quarterly dividend of $1.05 per share, and hiked it almost 10% shortly thereafter to $1.15 per share for dividends paid in June. It again expects to pay a dividend of $1.15 per share to investors in September.
Declaring dividends of $3.35 for the first three quarters of 2024, management expects to pay a dividend of $1.15 in the fourth quarter, achieving its target of dividends per share of $4.50. Should it succeed in making this last distribution, Phillips 66 will have returned about $1.9 billion to shareholders in 2024 in the form of dividends.
Time to gas up on Phillips 66 and its juicy dividend
From operating pipelines and refineries to marketing gasoline, Phillips 66 generates significant operational cash flow -- $7 billion, for example, in 2023. Management is aiming to return more than 50% of cash from operations to shareholders, and the company has a low payout ratio (27% on average for the past three years). As a result, Phillips 66 looks like a solid energy stock to consider for boosting your passive income stream.
