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Woodside’s cash splash for shareholders

Shareholders in Woodside Petroleum (ASX: WPL) are set to receive a special dividend and higher dividends in future, as the company take a more shareholder friendly focus.

Woodside announced today that it will pay shareholders a special dividend of 63 US cents per share, which will be fully franked. The dividend will be paid on May 29 to all shareholders registered on the record date of 6 May, with the ex-dividend date set at April 30.

“Woodside is in the fortunate position, at the present time, of having a number of promising growth prospects ahead of it and also experiencing strong cash flows.” said Chairman, Michael Chaney.

“Given the lead times involved with the growth projects and forecast reductions in the company’s debt levels, the Board has concluded that it would be appropriate to pay a special dividend to shareholders now and increase the company’s dividend payout ratio.”

Going forward, Woodside has pledged to target a dividend payout ratio of 80% of underlying profit after tax, which on current forecasts is expected to be maintained for several years.

After deciding not to go ahead with an onshore LNG plant at James Price Point, which was expected to cost upwards of $40 billion, Woodside doesn’t have a lot of mega new projects under development. A decision on how to process its Browse gas is unlikely to be reached within two years, and with its Pluto LNG plant in production, cash flows are soaring.

This appears to herald a new era of focus on shareholders by energy and resources companies. Long accused of sacrificing shareholder returns by focusing on growth for growth’s sake, oil, gas and mining companies may finally be heeding the call to look after their shareholders.

Miners Rio Tinto Limited (ASX: RIO) and BHP Billiton (ASX: BHP) also appear likely to cut back on their capital development, cut costs and sell off non-core assets, with some of the proceeds potentially returned to shareholders.

Foolish takeaway

Investors applauded the news, pushing up Woodside’s shares by over 7% in early morning trade, compared to the S&P/ ASX 200 Index (Index: ^AXJO) (ASX: XJO) rise of 1%.

Oil prices are set to rise dramatically over time. With limited supply — recent estimates suggest we only have enough oil to last 40 years — and growing demand from quickly expanding economies like India and China, oil prices can’t help but go up. Position yourself to profit from this trend now, with The Motley Fool’s brand-new FREE research report, 3 Oil Stocks to Send Your Portfolio Gushing Higher. Click here now, it’s FREE!

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King owns shares in Woodside and BHP.

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