When you examine the performance of Pioneer Natural Resources (PXD -2.28%) you need to keep two factors in mind. There's the stock price and a hefty dividend, which both have to be factored into your calculations. A look at how a $10,000 investment would have played out since July 1, 2022, provides a helpful illustration.
The stock price return is meh
To get some numbers out as quickly as possible, a $10,000 investment in Pioneer made on July 1, 2022, would be worth roughly $10,800 today. For comparison, the same amount put into an S&P 500 index fund would be worth $11,700. These are stock-only returns, and they highlight something you have to consider when looking at an energy producer like Pioneer Natural Resources -- the impact of energy prices.
The blue line on that chart represents West Texas intermediate (WTI) crude prices. That's a key U.S. oil benchmark. Pioneer Natural Resources is an onshore U.S. energy producer, and its top and bottom lines are highly tied to the ups and downs of WTI crude. Thus, investor sentiment around the stock will tend to ebb and flow along with that index.
The time period here was selected to broadly correspond to a downturn in oil prices. So it's hardly shocking that Pioneer Natural Resources underperformed the S&P 500 index over this span. However, that's only looking at stock price movement.
PXD Dividend Per Share (Quarterly) data by YCharts
Dividends play a big role at Pioneer
What's interesting about Pioneer Natural Resources is that it has chosen to tie its dividend payments to financial performance. That has the practical effect of tying the dividend to energy prices, though with a slight lag since reported financial results are backward looking. This is a fairly direct way to reward investors, though anyone looking to create a consistent dividend stream would probably hate the idea. Still, investors need to consider both price and dividends here to fully appreciate the return.
PXD Total Return Level data by YCharts
As this chart highlights, the total return, which assumes dividend reinvestment, looks very different from the stock-only performance. Now, Pioneer Natural Resources has turned $10,000 into $12,000 since July 1, 2022. That's just slightly more than the $11,900 that a similar investment in the S&P 500 index would have grown to over the same span.
What's also notable here is the swift jump at the end of the graph. Oil prices have begun to rebound, and that has had investors jumping back into energy stocks like Pioneer Natural Resources. Total return got an extra boost from the dividends that got paid when the stock was weak, since lower stock prices meant more shares were getting acquired through dividend reinvestment. That's a big benefit of reinvesting dividends and another reason that simply looking at stock price return isn't the complete picture when considering an energy stock like Pioneer Natural Resources.
Be prepared for the yield to fluctuate
Pioneer's dividend yield today is around 6.8%, which is fairly high, given the 1.4% yield on the S&P 500 index. But given the variable nature of the dividend payment, you can't expect that yield to be a constant. By design, it will change as the dividend goes up and down along with the company's financial results. Yet you really need to consider that lofty income stream when you look at this energy stock's performance, or you'll risk overlooking a key factor in the return equation for investors. It's a key way in which the company rewards its shareholders.
