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Why Oil Stock Dividends are ‘Mostly’ Safe

Raymond James analyst Pavel Molchanov and team argue that the dividends of oil exploration & production companies like ExxonMobil (XOM), Chevron (CVX), Anadarko Petroleum (APC), and Occidental Petroleum (OXY) are “mostly safe in the current commodity landscape” despite Chesapeake Energy’s (CHK) decision to suspend its payout. They explain why:

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We project only one company (Anadarko) out of 18 to fully cover the 2016 dividend payout out of cash flow at strip pricing – and only three (Anadarko, California Resources (CRC), EOG Resources (EOG)) under our price forecast. Needless to say, that’s not ideal. However – and this is the key part – this does not mean that dividends will be cut. The reason is this: all of the companies that have a healthy balance sheet today should still have a healthy balance sheet at the end of 2016, even if they maintain the current dividend. In other words, keeping the...