Rabu, 25 Juni 2025

You MUST see this chart...

Shield

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Permian Resources' Free Cash Flow Is an Income Investor's Dream

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Normally, when I talk about stocks and charts, I'm referring to the ones that show the stock's price action.

But today, I'm showing you a chart that is so spectacular, you'll want to take a good look.

Chart: Permian Resources' Free Cash Flow
View larger image
 

This chart represents the free cash flow for oil and gas driller Permian Resources (NYSE: PR).

You can see huge growth over the past few years. In 2025, free cash flow is forecast to increase by another 13%.

The stock currently yields 4.2% and its free cash flow growth is an important part of determining if the dividend is safe.

Let's look at some of the other elements.

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Last year, the company paid $467 million in dividends, for a low payout ratio of 35%. This year, dividends paid is expected to more than double to $1 billion. If the company achieves the $1.5 billion in free cash flow that is expected, the payout ratio will rise to 66% - which is still fine. I'm comfortable with a payout ratio of 75% or lower for most companies.

Permian Resources has a short but complicated dividend payment history.

It only started paying one in the fourth quarter of 2022. It paid a dividend that was part fixed and part variable. For example, last year it paid a $0.06 fixed dividend and $0.15 variable in the second quarter.

Beginning in the fourth quarter of last year, the company eliminated the variable dividend but raised the fixed payout to $0.15 per share.

One could argue that a decline from $0.21 in fixed plus variable dividends to $0.15 is a cut, but I've always viewed variable dividends as uncertain. In fact, if the company still paid a variable dividend the likelihood of a cut would be much higher since variable dividends almost always fall at some point.

Based on Permian Resources' cash flow and dividend history, how safe do you consider its payout?

Click one of the buttons below to share your grade. (You'll be able to see my grade on the next page.)

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