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This Magnificent Energy Stock Has Returned $43 Billion in Cash to Investors Since 2012 (and There's Plenty More to Come in 2025 and Beyond)
PSXPhillips 66(PSX) The Motley Fool·2024-12-17 10:22

Core Viewpoint - Phillips 66 has effectively returned value to shareholders since its spinoff from ConocoPhillips in 2012, distributing 43billionincash,exceeding20043 billion in cash, exceeding 200% of its initial market capitalization [1] Group 1: Cash Flow and Business Model - Phillips 66 operates a diversified business model that includes downstream services, midstream facilities, chemicals, and renewable fuels, allowing for higher returns and lower volatility compared to peers [2] - The company has focused on expanding non-refining operations, aiming to grow annual earnings capacity by 4 billion to 14billionby2025,whichisexpectedtoincreasecashflowfromoperationsbyover5014 billion by 2025, which is expected to increase cash flow from operations by over 50% from 7 billion to over 10billion[3]Group2:ShareholderReturns−Thecompanysetatargetof10 billion [3] Group 2: Shareholder Returns - The company set a target of 13 billion to 15billionincumulativecashdistributionstoshareholdersbytheendof2023,whichwouldbringtotaldistributionssince2012to15 billion in cumulative cash distributions to shareholders by the end of 2023, which would bring total distributions since 2012 to 43 billion at the low end [4] - Phillips 66 has consistently increased its dividend since 2012, achieving a 16% compound annual growth rate, including a 10% increase earlier this year, and has repurchased 34% of its outstanding shares [5] Group 3: Future Outlook - In 2025, Phillips 66 expects to achieve 14billioninearningsandover14 billion in earnings and over 10 billion in cash flow from operations, with plans to reinvest approximately 2.1billionintosustainingandgrowingoperations[6][7]−Thecompanyanticipatesgeneratingmorefreecashflowin2024duetoaslightlyreducedcapitalbudgetandhasexceededits2.1 billion into sustaining and growing operations [6][7] - The company anticipates generating more free cash flow in 2024 due to a slightly reduced capital budget and has exceeded its 3 billion target for non-core asset sales, enhancing its balance sheet [8] - With rising cash flow and a strengthened balance sheet, Phillips 66 is positioned to return over $5 billion in cash to shareholders in 2024, aiming to distribute more than 50% of its cash flow from operations [9] Group 4: Investment Appeal - The strategy of diversifying and investing in downstream operations has resulted in significant earnings growth and reduced cash flow volatility, making Phillips 66 an attractive option for investors seeking lower-risk exposure in the energy sector [11]