Dividends4Life: Is ConocoPhillips' Dividend Safe?

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Is ConocoPhillips' Dividend Safe?

Posted by D4L | Tuesday, July 10, 2012 | | 0 comments »

Last January, I wrote that 2012 could turn out to be disastrous for Big Oil companies. My reason for saying so was that some of these companies were banking on higher crude oil prices to drive up revenue while their underlying fundamental growth languished. Last week, Goldman Sachs (NYSE: GS) downgraded ConocoPhillips (NYSE: COP), which is now an independent exploration and production company, following the spin-off of the company's refining and marketing segment into Phillips 66 (NYSE: PSX).

Conoco has ample reserves to develop; however, the problem with a cash balance of $4 billion is that there isn't enough to meet the average capital expenditure of $10 billion. Free cash flow over the trailing 12 months stood at $3.5 billion. On top of that, meeting average dividend payments of $3.5 billion a year is another concern management cannot ignore. Conoco's dividend yield stands at 4.8%.

Source: Motley Fool

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