Why the variable dividend trend is growing, and how investors should play it

Pipes carry water, steam and oil at Devon Energy Corp.'s 35,000 barrel per day Jackfish Projects plant, where Steam Assisted Gravity Drainage (SAGD) is used to extract bitumen from oil sands, near Conklin, Alberta, Canada.
Jimmy Jeong | Bloomberg | Getty Images

Variable dividends are becoming increasingly popular for oil and gas companies, as the sector's mentality shifts from one of growth at all costs to prioritizing shareholder returns.

The practice of variable dividends hasn't always been the most popular strategy with investors — especially those seeking income — since it can mean unpredictable and variable cashflows.

But this time around, it speaks to a fundamental mindset change in the energy patch, according to Ninepoint Partners senior portfolio manager Eric Nuttall.

"The codification of variable quarterly dividends is a massive game changer, and it represents how the very ethos of these companies has changed," he said.

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