A double-digit dividend yield is a red flag. Diversified Energy Company’s move to cut its dividend and rethink its capital allocation strategy should not be a surprise. Its dividend yield had topped out north of 30 per cent.
The American oil and gas producer has reduced its final quarterly dividend to 29 cents a share, a two-thirds reduction from the third quarter, once a share consolidation is taken into account. A $42 million tender offer has also been cancelled. Cash will be redirected towards acquisitions and paying down debt.
The reset should be welcomed by investors. Suspicion that the dividend had become unsustainable had sent the shares down by more than 50 per cent over the past 12 months. Last year the group generated free
