Any time a company continuously raises its dividend, especially when said increase is in the double-digit range, investors should take notice. Phillips 66 (NYSE:PSX) is a refining & chemicals company with a history of providing investors with a substantial, growing dividend yield.
Over the past five years, Phillips 66 has grown its dividend substantially, on the order of 30% compounded annually, in addition to providing investors with capital appreciation of more than 50%.
This dividend growth has resulted in substantial dividend payments for investors who bought Phillips 66 stock and held on – with the company raising its dividend again this year by 11%, investors are beginning to get the picture that Phillips 66 is one of those companies that makes sense to buy and hold – for a long time.
Phillips 66 remains a key holding of the one and only Warren Buffett, who has added to his position in recent quarters amid a softening of the refiner, given continued downward pressure on the price of oil and a bleak outlook for the oil sector in general.
What Buffett is likely focusing on with Phillips 66 is the company’s chemicals business and ability to churn out profits in times of high oil prices as well as subdued oil prices.
In the first quarter of 2017, Phillips 66 reported that its chemicals and midstream business accounted for nearly 50% of the company’s total earnings ($258 million of $611 million), meaning the refiner is less reliant on the price of oil to be profitable than many of its peers.
Strong performance in this category is expected to continue, and I expect Phillips 66 will be one of the few outperformers in years to come, accordingly.
Invest wisely, my friends.
