How much do oil companies pay out to American shareholders and why do they repurchase stocks?
Analysis of API's compilation of public data, independent research and corporate annual reports found that the oil and natural gas industry paid out approximately $35 billion in dividends distributed to shareholders in 2010 alone. But it is important to remember, less than 3 percent of industry shares are owned by corporate officers and board members. The rest are owned by regular Americans, many of them members of the middle class, such as teachers, policemen and women, and firefighters. When dividends are paid, these are the main beneficiaries.
The oil and natural gas industry is very capital intensive and devotes the largest share of its earnings to adding new property and equipment to its upstream and downstream operations. It also repurchases stock as a means of further adding value for its shareholders. In fact, it is the responsibility of company officials to build value for shareholders. They do this through stock repurchases and by paying dividends, which also benefit shareholders.
When companies repurchase stock, they are supporting the equity of the company. This in turn helps the owners of the companies — retirees, future retirees, and millions of Americans who have invested their hard-earned savings on the expectation of a reasonable return on their investment.
While the share of stock repurchases in the oil and natural gas industry has increased in recent years, it has averaged nearly half of that for the S&P Industrial group. For the last 13 years, the oil and natural gas industry spent an average of 34 percent of net income on stock repurchases, while the rate for the S&P Industrials was 66 percent.