Occidental Petroleum (OXY 0.89%) doesn't get the credit it deserves. The oil giant had rewarded its investors through both good times and bad. It was one of the few producers that maintained its dividend during the oil market's recent downturn. That's one of several reasons income-seeking investors should seriously consider adding the oil producer and its 4.7%-yielding dividend to their portfolio.

A history of rewarding income investors

Occidental Petroleum has been paying dividends since 1975. The company has also increased it every year since 2002, boosting it by a jaw-dropping 500% over that time frame. That 16-year streak is one of the longest in the oil patch. That's partially a testament to Occidental Petroleum but also because many of its peers reset their payouts following the oil price crash of 2014.

A jar of coins with the word dividneds written on the front.

Image source: Getty Images.

The company has succeeded where others failed for two reasons. First, Occidental Petroleum generates gobs of cash flow because of its integrated business model. The company not only operates low-cost oil and gas assets but also produces sustainable cash flow from its midstream and petrochemicals businesses. That downstream chemicals business has the added benefit of helping offset some of the impact of commodity price volatility since it consumes oil and gas. As such, it makes more money when prices fall.

The second driver of Occidental's dividend success is its top-tier balance sheet. The company has one of the highest credit ratings in the oil patch. That gives it the financial flexibility to borrow money at low rates to help bridge gaps during periods of commodity price volatility.

As solid a payout as investors will find in the oil patch

Occidental Petroleum has spent the past several years improving the long-term sustainability of its operations. It drove down costs by selling non-core assets and reinvesting the proceeds into lower cost opportunities. The company only needs oil to average $40 a barrel to sustain its operations as a result. At that price point, it can produce enough cash to maintain its current production rate and dividend. That sets the company up to generate increasing free cash flow above that level.

The oil producer currently expects to use some of its excess cash to invest in additional oil projects to boost production. In 2019, the company anticipates spending between $4.4 billion and $4.5 billion, assuming oil averages $50 a barrel. That would provide it with enough money to grow output by 8% to 10% while also paying its dividend, which cost $2.8 billion last year. Both amounts, however, will likely head higher in 2019.

That's because Occidental should increase its dividend again this year. On top of that, it plans to boost investment spending as oil prices rise. At $60 a barrel, which is below the current $64 level, the company could spend between $5 billion and $5.3 billion. That would be enough money to expand output by 11% to 13% this year.

These growth-focused investments have Occidental Petroleum on track to generate even more cash in the coming years. By 2022, the company could produce $9 billion in cash flow at $60 oil. With it only needing to spend in the $5 billion to $5.3 billion range to continue growing production, it would produce as much as $4 billion in free cash. That would support a growing dividend as well as continued share repurchases. Meanwhile, the company can sustain its payout even if crude crashes, thanks to its top-tier balance sheet and low oil price breakeven level.

Not all oil dividends are bad

Many oil stocks burned income investors when crude prices crashed by slashing their once lucrative payouts. Occidental, however, not only maintained it during the sector's last rough patch but also continued growing it. Meanwhile, its efforts to drive down its cost structure make its payout even more sustainable at lower oil prices, which increases the probability it will continue growing. That's why income-seeking investors should seriously consider buying Occidental Petroleum for its high-yield dividend.