We bring before you the best performing stock among all S&P 500 stocks in 2021. It did a 179% growth in that year. And despite this immense achievement and growth, its dividend potential is what brings Devon Energy Corporation (NYSE: DVN) to your screen today.
Source: Jan-Rune Smenes Reite
Devon Energy, based in the United States, is involved in oil and gas exploration, development, and production. The oil producer has been doing well on the business end lately, and it is rewarding the faith of its shareholders in stock growth and high dividend yield.
The dividend yield of Devon Energy is 7.3%, close to the highest it has ever been in the company’s 29-year history of paying dividends, and about 6 times higher than the S&P 500 average yield. But even with this high yield, the dividend only makes up 47% of the oil producer’s total income.
A little caveat about Devon Energy’s dividend payout, though, is how its dividend is two-pronged: fixed dividend and variable dividend. The variable dividend is paid from excess cash flow. However, investors may rest easy knowing that DVN has no shortage of cash flow soon. The world economy is only just getting back to the normalcy of the pre-pandemic times, and the demand on the oil and gas industry is only going to increase.
Source: Devon Energy
Also, with the oil producer’s plans to bring 40 more oil wells online to add to the 47 it already has at its Texas OIlfield, there’s room for more cash flow growth. The company also aims to maintain efficient operations at the Williston basin oilfield, which generated the most free cash flow for the company in 2021.
Despite DVN’s rise in stock price since 2020, its price to earnings ratio of 13.1 trails the US oil and gas industry by 3.2. This suggests that there remains an upside for this stock. Although the 179% growth feat it achieved in 2021 may be too big an ask, Devon Energy could still pull an outstanding year in 2022.
Technical Analysis
DVN stock has been going up so fast that it has barely had enough time to rest at the support and resistance levels around it. It already looks to be challenging the $57 – $58.8 resistance level after almost tearing through the $50.7 – $52.5 level.
One thing that’s immediately obvious on the DVN stock is that it looks like it’s flying off the roof. And when things take off that way, they have to land somehow. The landing of the DVN stock could be as little as a pullback, or it could be a complete reversal. That the price has strayed to the overbought area of the RSI indicator supports this hypothesis.
While we hold a bullish sentiment for DVN stock long-term, we would rather wait for it to land before we make any commitment. The landing could be as little as a breakout and retest of the $57 – $58.8 level or a pullback to any of the other levels. It could also be a return to the base trendline that has underlined the price for over a year now. Whatever it is, we’re taking it.
