To The Moon

If I were Warren Buffett, I would buy $Devon(DVN)$

The key tenets of Warren Buffett are to buy stocks in companies that exhibit solid fundamentals, strong earnings power and the potential for continued growth.  Devon Energy ticks all these tenets  and more.  It is an exceptional dividend growth stock.

Devon Energy is a leading independent  oil and natural gas exploration and production company whose operations are focused onshore in the USA.  It is also a component within the S&P500 Energy.

The current war in Ukraine and the current ban on Russian oil by US and its allies have caused oil prices to spiral.  Europe is also experiencing an energy crisis with its gas supply from Russia's cut off.  On top of that OPEC has recently cut down its oil production. 

Demand is therefore expected to remain high and supply rather limited. 

Against this backdrop, Devon Energy is seeing solid growth in revenue and profits.   In 2022, Devon Energy is expected to grow revenue 67% and earnings 152%.

Devon Energy launched the industry's first fixed plus variable dividend framework in 2021.  Under this policy, Devon pays a sustainable base dividend that it complements with a variable payment of up to 50% of its quarterly free cash flow.  Devon uses the other half of its excess cash to strengthen its rock solid balance sheet, repurchase shares and acquire cash flowing oil properties.

Devon has already boosted its base dividend twice and has paid a steadily rising variable payout.  The current dividend yield is 6.04%.  On top of that Devon has a cash rich balance sheet which enables it to go on an acquisition spree.  Devon has already made 2 acquisitions this year.

Devon's current P/E ratio is 9.78 which is similar to Occidental Petroleum 9.34.   Valuation shows that both stocks are undervalued. 

$Devon(DVN)$ is expected to report its 3Q22 earnings on 1 November and I expect it to beat market expectations. 

It is Warren Buffett's strategy to buy "wonderful companies at fair price" and I believe that $Devon(DVN)$ fits the bill to a T. 🚀🚀🚀🌛🌛🌛🌈🌈🌈💰💰💰🎊🎉🎊

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