Energy Bests All Sectors in Q1 Dividend, Buyback Yields

Editor's note: This is article has been updated with a list of the top 20 largest buybacks by company.

The energy sector led the S&P 500 and every other sector in combined yields of dividends and stock buybacks in the first quarter, according to S&P Global figures released on June 14.

The energy sector’s combined yields were 8.36%, trailed by the communication services sector in second place at 6.2%. Overall yields for S&P 500 were 4.05%.

For oil and gas companies, the returns keep coming. Shell announced on the morning of June 14 that it will raise dividend per share by an expected 15% and commence stock buybacks of at least $15 billion for the second half of 2023.

Despite the oil and gas industry’s commanding lead in yields, the sector continues to be a laggard. The industry’s representation on the S&P is roughly 5%, Tim Perry, managing director at Credit Suisse, said at last month’s SUPER DUG conference in Fort Worth, Texas.

S&P Global’s first quarter numbers are the latest evidence of energy companies’ aggressive cash return to investors and sustained capital discipline as E&Ps try to entice investors to return to the sector.

Subash Chandra, an energy analyst at Benchmark, took it as an encouraging sign that energy companies are hitting the right notes for the current cycle.

“Maintaining cash returns, reducing capex are healthy signs that an industry is navigating the downturn appropriately. Down cycle response is arguably more important than upcycles to bolstering industry credibility and valuation,” Chandra told Hart Energy.

Three energy companies were among the top 20 companies buying back stock in the first quarter. Exxon Mobil Corp. repurchased $4.3 billion in shares, Chevron Corp. repurchased $3.6 billion and Marathon Petroleum with nearly $3.2 billion, according to the S&P Global numbers.

Southern Methodist University finance professor Don Shelly said it is significant that the energy sector share purchases were broad based.

“The integrated oils, such as Chevron, ExxonMobil & Occidental, E&P, refiners and marketers all made large share repurchases in the first quarter,” he said “This probably indicates expectations that prices and margins are expected to be steady for the rest of the year.”