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Noah Zivitz

Managing Editor, BNN Bloomberg

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Cenovus Energy Inc. is rewarding patient shareholders as surging cash flow puts the oil and gas producer on track to hit its debt target.

In a release early Wednesday, Cenovus announced it will double its quarterly dividend to 3.5 cents per share as of the fourth quarter, and said its board also approved a plan to repurchase up to 10 per cent of its common shares.

It's equipped to do so after higher oil prices and a 71 per cent year-over-year increase in production helped push the company’s cash from operating activities to $2.14 billion, up 192 per cent from a year earlier when $732 million was generated. 

In the release, Cenovus said it's poised to achieve its target of sub-$10 billion in net debt "imminently." 

"Our free funds flow capacity will support swiftly advancing toward our longer-term net debt target of less than $8 billion, while balancing growth in shareholder returns," said Cenovus President and Chief Executive Officer Alex Pourbaix in a release.

However, at least one analyst who tracks the company suggested Cenovus is being stingy with the dividend.

“Doubling of the dividend is always a good thing, to be sure. But given the company’s low payout ratio, it feels like the dividend could have been stretched further (the yield is still below one per cent),” wrote Desjardins Capital Markets Analyst Justin Bouchard in a report to clients Wednesday. He has a buy recommendation on Cenovus, with a price target of $20.00 per share.

Cenovus is just the latest in a string of big energy names around the globe that have been sharing the wealth with their investors as cash flow soars amid higher oil prices.

Just last week, Suncor Energy Inc. said it will double its dividend and expand its share buyback strategy.

More recently, BP Plc said on Tuesday it was planning to repurchase up to US$1.25 billion of its shares. And, last Friday, Exxon Mobil announced it’s planning to repurchase up to US$10 billion of its shares over the span of two years.