Daily Stock Pick: November 10th, 2022

Stocks surged in early trading after suffering steep losses in the previous session. Consumer prices data released this morning raised hopes that inflation has peaked. October’s CPI reading showed a mere 0.4% increase for the month, and a 7.7% addition year over year, the lowest annual increase since January. Still, the lack of a solid pattern of lower inflation has many investors wondering if we are turning a corner or if it’s time for a reality check. 

With so many looming questions, volatility is widely expected to continue, making the job of selecting stocks difficult. A logical move in times like these is dividend stocks, which pay you just to hold them. Dividend-paying companies regularly reward investors directly with a portion of the cash flow.  

The most desirable dividend stocks have a history of raising their payouts over time as the company’s profits grow. Today we’ll look at a high-yielding stock that seems ripe for the picking heading into the new year.  

Pioneer Natural Resources Company (PXD) has long viewed sustainability as a balance of economic growth, environmental stewardship, and social responsibility. Its emphasis is on developing natural resources in a manner that protects surrounding communities and preserves the environment.

In the wake of the pandemic, when energy prices were cheap, PXD struck an almost perfectly timed agreement to buy fellow Permian Basin producer Parsley Energy for $4.5 billion. If you’re wondering how PXD managed to finance that transaction, the answer lies in the fact that it was an all-stock deal that ensured Pioneer didn’t have a new giant debt load hanging over its head. The fact that Parsley operated primarily in the same region of West Texas, where Pioneer had both expertise and existing staff, has paid off over time.   

That deal was a coup for Pioneer shareholders, built on the fact it was large and well-capitalized at a time when stressed and debt-reliant shale plays were looking for a white knight. On top of that acquisition, PXD also boosted its dividend by 25% at the start of the year as further evidence of its strong balance sheet.

Investors can look forward to upcoming tailwinds, including Pioneer’s recently announced partnership with the world’s largest renewable energy producer, NextEraEnergy (NEE), to develop a 140-megawatt wind generation facility on Pioneer-owned land. The project will supply the company’s Permian Basin operations with low-cost, renewable power and is expected to be operational next year.  

In the second quarter, revenue was up 22% YOY to $6.09 billion, smashing the consensus estimate of 4.57 billion. The company reported earnings of $7.48 per share, beating consensus expectations of $7.27 per share. So far, in 2022, the company has rewarded its investors handsomely with $20.73 per share through its generous 10.78% cash dividend. Even after gaining 30% this year, Pioneer shares likely still have valuation upside in addition to their tremendous dividend income potential.