Oil and gas producers go from boom-bust bets to safety plays

SKYROCKETING oil prices have helped make oil and gas producers the best performers in the stock market this year, triggering a rapid rise in dividend payments and a bonanza of special dividends.

Now, some investors are of the mind that those fat yields are here to stay even as crude prices retreat from US$100 a barrel –effectively transforming oil and gas producers from high-risk, high-reward wagers to safe income investments. With earnings season approaching and the stocks down more than 20 per cent from their June high, the market is about to get a look at how determined the companies are to maintain those high payouts.

Dividend payments from large energy companies exploded in the third quarter, whetting investors’ appetite for more. S&P 500 Energy Index companies paid out US$16.4 billion in cumulative dividends, which is up 15 per cent from US$14.3 billion in the second quarter and a whopping 49 per cent from US$11 billion a year ago, according to data compiled by Bloomberg.