Diamondback Energy (FANG) Stock: Why It Increased 8.17%

By Amit Chowdhry ● Jun 22, 2022
  • The stock price of Diamondback Energy Inc (NASDAQ: FANG) increased by 8.17% in the previous trading session. This is why.

The stock price of Diamondback Energy Inc (NASDAQ: FANG) increased by 8.17% in the previous trading session. Investors responded positively to Diamondback Energy announcing the next step in its return of the capital program.

Starting in the third quarter of 2022, the company’s Board of Directors has approved an increase to its return of capital commitment to at least 75% of Free Cash Flow (as defined below), from its previous commitment of at least 50% of Free Cash Flow. Additionally, the Company today announced its intention to increase its base dividend to $3.00 per common share annually ($0.75 per quarter) beginning with the second quarter of 2022.

When declared, this will represent a 7.1% increase from the company’s previous annual base dividend of $2.80 per share ($0.70 per quarter) and implies a 2.5% annualized yield based on the June 17, 2022 closing share price of $122.29. Diamondback’s base dividend will remain its primary mechanism for returning capital to stockholders, with the additional return of capital expected to come in the form of variable dividends and opportunistic share repurchases.

For the second quarter of 2022, the company plans to maintain its first-quarter 2022 base-plus-variable dividend payout of $3.05 per share, which implies a 10.0% annualized yield based on the June 17, 2022 closing share price of $122.29. Diamondback has also repurchased 1,966,516 shares of its common stock for about $253 million to date during the second quarter at a weighted average price of approximately $128.42 per share. While the second quarter has not yet ended, the company expects that the combination of these stock repurchases together with its expected base-plus-variable dividends for the quarter will constitute a return of capital to stockholders well in excess of 50% of Diamondback’s Free Cash Flow for the second quarter.

The company expects to declare and announce its base and variable dividend for the second quarter in connection with its announcement of second-quarter earnings on or about August 1, 2022, at which time the record date and payment date for those dividends will also be announced. Base and variable dividends remain subject to review and approval at the discretion of the company’s Board of Directors.

KEY QUOTES:

“We are pleased to announce our enhanced capital return framework. This is a natural progression of our shareholder returns program that began with the initiation of our base dividend in 2018, which has been increased 500% since then and continues to deliver significant value to our stockholders.”

“We have continued to use cash on hand to pay down debt and believe that we now have a strong balance sheet that can withstand another down cycle. The increased return of capital framework announced today displays the confidence we have in our forward outlook, with our high cash margins and low-cost structure driving an increasing return on capital. Going forward, we will continue to remain flexible, using a combination of our growing and sustainable base dividend, variable dividend and opportunistic share repurchase program to generate the highest value proposition for our shareholders.”

— Travis Stice, Chairman and Chief Executive Officer of Diamondback

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.