This week’s Stock of the Week is an energy company that has taken a small hit for a healthier future.
Devon Energy Corporation (DVN) explores for, develops and produces oil, natural gas and natural-gas liquids entirely in North America.
It operates about 14,600 wells. In addition to its geographic focus—in the Delaware Basin of West Texas and southern New Mexico and the STACK drilling area of Oklahoma—the company is arranging asset sales to improve its financial profile and make its business easier to manage. This will reduce revenue for the next several years, but after a likely modest earnings drop this year, the more focused company should resume earnings growth.
Using proceeds from recent asset sales, Devon will be buying back $4 billion of its shares—about 20% of its total market capitalization—over the next year. It has raised its dividend by 33%, and it now stands at $0.32/share/yr., recently yielding 0.7%. Production is rising strongly and should grow 20% this year over last year. Revenue was $14 billion last year and will likely be $13.7 billion this year and $13.2 billion in 2019 as asset sales are completed.
Fiscal year: December. Earnings per share: 2019 est./$2.42…2018 est./$1.55…2017/$1.59.
Michael Scanlon is senior managing director, investments, Manulife Asset Management, and portfolio manager of the $1.9 billion John Hancock Balanced Fund (SVBAX), Boston. JHFunds.com