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On Friday, shares of Pioneer Natural Resources (PXD) fell on a Bloomberg story reporting rumored talks between the Permian Basin oil shale producer and Appalachian natural gas producer Range Resources (RRC).

On Monday shares of Pioneer rebounded as the company denied that it was in acquisition talks.

The lesson? Investors really don’t want Pioneer to spend money on acquiring more assets.

On a company-specific level, the rumors made no sense. Pioneer is an oil-centered producer that gets the benefit of strong oil prices. Natural gas prices are depressed at the moment. I think they’re headed for a seasonal rally but in the longer term, I think the supply-demand case favors oil over natural gas. And there’s also the little question of the cost of production. Because of the high quality of Pioneer’s assets in the Permian Basin, the company has an extraordinarily low breakeven cost at $39 a barrel for West Texas Intermediate. The company’s relatively modest capital spending budget of $4.45 to $4.75 billion for 2023–up 21% from 2022–is focused on increasing production from the company’s low-cost assets. Any deal would have to result in higher cash flow from equally low-cost assets. That’s a high bar.

Second, on an oil industry level, the deal runs against the logic in the sector which concentrates on increasing returns to shareholders through buybacks and high dividend payouts. In the fourth quarter of 2022, Pioneer returned 95% of free cash flow to investors in dividends and buybacks. Any deal, from a Wall Street, perspective should work to increase free cash flow so that an oil company, such as Pioneer, can continue this level of distribution.

The most recent dividend payout from Pioneer–base dividend and bonus dividend–resulted in a yield of 11%. I think Pioneer is a good candidate for producing a dividend of 8% or more–maybe solidly more if oil prices climb toward $100 a barrel.

Which is why I recently added the stock to my Dividend Portfolio. Pioneer has been a member of my Jubak Picks Portfolio since January 2, 2022. That position is down–without counting dividends–by 2.9% to February 28