Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said on Tuesday it will suspend dividend payments starting in the current quarter to save up to $240 million a year.
The company, which like other oil and gas producers has been hurt by a drop in prices, had planned to pay an annual dividend of 35 cents per share.
Continue Reading Below
Analysts at Houston-based energy investment bank Tudor Pickering Holt said suspending the payout was prudent because few investors buy the stock for its low dividend yield of 3.4 percent.
In suspending its payout for the first time since 1998, Chesapeake joins other companies in the energy industry that are looking at dividends as means of conserving capital.
Chevron Corp said in May it would not raise its dividend in the second quarter and that it would see "where things shake out long term" before raising its payout.
ConocoPhillips last week raised its quarterly payout by a smaller-than-normal 1 cent, citing low oil prices.
Oklahoma City-based Chesapeake reported a first-quarter loss in May and said it would raise production this year.
The company said on Tuesday that money saved by not paying a dividend would be used to develop its "high-quality" assets.
The stock has lost more than 60 percent of its value in the past year. Shares of Chesapeake were down 4.7 percent at $9.79 on Tuesday morning on the New York Stock Exchange. (Reporting by Shubhankar Chakravorty and Anannya Pramanick in Bengaluru and Anna Driver in Houston; Editing by Ted Kerr and Matthew Lewis)