EOG Resources (EOG 1.07%) is a darling of the U.S. oil boom. The company's share price has surged nearly 200% during the past five years, outperforming almost all of its peers, both large and small.

However, right now the company only offers a token dividend payout of $0.125 per share per quarter, or $0.50 per annum, a yield of 0.44% at current prices.

In comparison, EOG's larger integrated peers, such as ExxonMobil (XOM 1.15%), offer much heftier dividend payouts, as well as stock buyback plans. So, the question is, will EOG's payout ever match up to that of its peers? Could the company triple its payout to $1.50 per share, a yield of 1.4% at current prices, and more in line with the market average of 1.9%?

Reinvesting
EOG has a valid reason for not paying a larger dividend right now. The company is reinvesting most of its cash generated from operations back into the business, and this is starting to pay off.

For example, from 2009 to 2012, EOG was free cash flow negative, as the company was spending more than it could afford developing oil fields.

Free cash flow is the resulting figure when capital spending is deducted from operating cash flow, or cash generated from operations. This is important because dividends are paid from free cash flow; the more free cash flow, the more cash available for dividend payouts and stock buybacks.

EOG's free cash flow averaged -$2 billion per annum during the period 2009 to 2012. However, last year the company became free cash flow positive for the first time in five years, reporting a small surplus of $270 million.

Printing money
After reporting a small free cash flow surplus during 2013, EOG reported an impressive free cash flow of $365 million for the first quarter of this year. To put this into some perspective, a free cash flow of $365 million meant that EOG generated 35% more cash during the first quarter of this year than it did during the whole of 2012.

Further, during the first quarter of this year, EOG's dividend payout of $0.125 per share cost the company $52 million. In other words, the payout was covered seven times by free cash flow during the first quarter.

So, it would seem that EOG does have enough cash to double or even triple its current dividend payout.

This is great news for investors.

Fiscal prudence
Still EOG's management is not yet ready to start handing out large quantities of cash to investors. The company plans to use its additional cash flow to hike capital spending, giving itself an $8.2 billion capital budget for this year, up from $7.1 billion reported last year. 

Additionally, EOG is trying to bring down debt built up over the past few years. The company managed to push down debt from 23% of total market cap at the end of 2013 to 21% by the end of the first quarter. This figure is expected to fall further throughout the year. 

Bigger is not always better
Dividend champion ExxonMobil, however, is going the other way. Indeed, while EOG hikes its payout, pays down debt and ramps up capital spending, Exxon is cutting capex and borrowing more. 

In particular, ExxonMobil anticipates capex of about $37 billion this year and for the next several years, compared to spending of $42.5 billion reported during 2013. Moreover, Exxon recently returned to the bond market to borrow $5.5 billion in cash, after a two-decade absence. 

Having said all of that, with a payout ratio of only 30% and a dividend history stretching back to 1882, the company is unlikely to cut payouts anytime soon. The oil giant also yields 2.7% right now, significantly more than EOG. 

Foolish summary
So all in all, it would appear that EOG can increase its dividend payout several times over. However, the company is first concentrating on paying down debt and boosting output, two prudent decisions as investors should only benefit over the longer term.