Big Oil is coming off yet another record-breaking year, with top- and bottom-line gains for the second quarter in a row. According to FactSet data, the energy sector’s revenue growth rate of 24.9 percent in Q2 2021 was significantly higher than Wall Street’s estimate of 19.4 percent, and the sector’s earnings of $15.9 billion in Q2 2021 compared to a loss of -$10.6 billion in Q2 2020 marked the largest Y/Y improvement of any of the S&P 500’s 11 market sectors.
Surprisingly, the Big Oil pair of ExxonMobil and Chevron Corp. were largely responsible for the sector’s stellar success, accounting for $13.9 billion of the $26.8 billion increase in earnings year over year. The majority of the oil and gas giants have been utilising their financial windfall to reward shareholders with bigger dividends and stock buybacks, which is unsurprising. During their most recent results call, Chevron, Marathon Oil, Equinor ASA, and Royal Dutch Shell announced dividend increases, while ConocoPhillips and BP Plc reintroduced share buybacks following strong earnings.
However, despite Wall Street’s hopes, Big Oil cash windfall, which includes large payouts, has largely failed to satisfy investors, a surprising occurrence in a market devoid of returns. However, there is a method to the chaos. Dividends and share buybacks are commonly used by companies across all industries to make their stock more appealing to investors. Dividends are paid to shareholders as a mark of appreciation for their investment in most companies.
Oil corporations, on the other hand, are extremely skilled at doling out token benefits, and Big Oil has some of the highest yields in the industry. ExxonMobil now has a dividend yield of 6.60 percent; Chevron has a 5.68 percent fwd yield, BP has a 5.56 percent fwd yield, Shell has a 5.01 percent fwd yield, and MPLX LP has a 10.01 percent fwd yield.