What happened
Shares of Cheniere Energy (LNG -0.73%) rose 3.6% in September, according to data provided by S&P Global Market Intelligence. While that might not sound like much, it significantly outperformed the 9.3% plunge in the S&P 500 last month. Fueling the liquefied natural gas (LNG) stock's resilient performance amid a challenging market is its new "20/20 Vision."
So what
Cheniere Energy announced that it approved a revised comprehensive long-term capital allocation plan last month. The strategy will enable the company to maintain investment-grade credit metrics, return additional capital to shareholders, and continue investing in accretive organic growth projects.
The company envisions generating over $20 billion of available cash through 2026 and a distributable cash flow run rate of more than $20 per share over the long term. That will supply it with the funds to construct Corpus Christi LNG Stage 3 while maintaining a strong credit profile and returning additional capital to shareholders.
Thanks to the strength of the LNG market this year, Cheniere achieved its initial target to pay down $4 billion of debt. It expects to continue paying down debt in the coming years to reach a long-term leverage target of four times so that it can maintain investment-grade credit metrics as it funds Corpus Christi.
The company also increased its share repurchase authorization by $4 billion for an additional three years. It now has the capacity to buy back more than 10% of its market capitalization. Cheniere expects to repurchase shares at the same rate it pays down debt, a fourfold increase.
Cheniere also increased its annual dividend by 20%. In addition, it boosted its dividend growth target from a mid-single-digit pace to around 10% annually through the construction of Corpus Christi LNG Stage 3.
Finally, the company plans to continue working toward securing additional expansions of its two LNG facilities. It filed to build another two LNG liquefaction trains at Corpus Christi, setting a near-term goal to expand its platform capacity to 60 million tons per year. It's also developing new opportunities at that location and Sabine Pass, establishing a long-term target to grow its platform to 90 million tons per year.
Analysts loved the plan. Several boosted their price targets for Cheniere's stock. For example, RBC Capital analyst Elvira Scotto increased the firm's price target from $184 to $199 per share while keeping the outperform rating. The catalyst was that Cheniere boosted shareholder returns "well above" the analyst's expectations. Meanwhile, Morgan Stanley analyst Devin McDermott raised the investment bank's price target from $154 to $203 per share while keeping the overweight rating. The analyst now sees an upside to a share price above $200 following the company's refreshed plan.
Now what
Cheniere Energy is capitalizing on robust demand for LNG as countries focus on energy security following Russia's invasion of Ukraine. That enabled the company to achieve its debt reduction target more quickly, setting it up to return more capital to shareholders even after starting a new expansion at Corpus Christi. With the stock recently in the $170s even after outperforming last month, it appears to have more upside ahead.
