Ann: Dividend/Distribution - STO, page-36

Some thoughts to help those displeased with the dividend:

Share buy-back versus dividend:
- Share buy back offers a return without an immediate income tax consequence. There are no franking credits at this stage to reduce any income tax consequence. Seems sound.
- STO have indicated they are undervalued - and if you agree with this assertion then a buy back makes better sense then a dividend. I see many complaining about share price - on that basis, seems sound.
- A share buy back will lead to an increase in share price all else being equal. A simple theoretical way to view it is if the company bought all shares outstanding but 1, the share price would not remain at ~$7 but would change to ~$23b.
- dividend policy indicates a low payout ratio - this is not a mature, dividend paying stock yet. There are other stocks that offer this if dividend income is a must have.

cash versus shareholder returns:
- STO have decided to retain cash, reducing net debt. There is quite a bit capital required for development going forward. Seems sound.
- improves ability to navigate commodity price cycle. Santos has already faced this issue not so long ago. Seems sound if not prudent.

I recommend focusing on the cashflow rather than the dividend….