ConocoPhillips' 3.84% Dividend Yield Implies COP Stock Could be 24% Undervalued

Core Viewpoint - ConocoPhillips Inc. (COP) has increased its dividend per share (DPS) by 7.7% to $3.36 annually, resulting in a 3.84% annual yield, which is significantly above its historical average, suggesting a potential 24% increase in stock value [1][4][6]. Dividend Increase - The DPS was raised from 78 cents quarterly to 84 cents, equating to an annual rate of $3.36 [4]. - The new dividend yield of 3.84% is calculated as $3.36 DPS divided by the current share price of $87.47 [4]. - The quarterly cost of the new dividend is approximately $1.038 billion, leading to an annual cost of about $4.1519 billion based on 1.236 billion shares outstanding [4]. Cash Flow and Payout Ratio - The new dividend represents 19.34% of ConocoPhillips' run-rate cash flow from operations (CFFO) as of Q3, which annualizes to $21.464 billion [5]. - This payout aligns with the company's management estimate of distributing 45% of CFFO between dividends and buybacks, with half allocated to each [5][6]. Historical Dividend Yield - Over the past four years, COP has had an average dividend yield of 3.10%, while the average yield over the previous five years was 2.55% [7]. - The conservative estimate for future stock performance assumes a return to the highest historical yield of 3.10% [7][8].