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China National Offshore Oil Company (CEO) traded ex-dividend on May 25th with a payout of $3.2456 per share. This is a 12.28% increase over the $2.8907 paid in the same quarter last year. Based on an annualized dividend payout of $6.49, my yield on investment for CEO is currently 3.26%.
CNOOC's dividend growth rate has been decelerating over the past several years with its 5 and 3 year CAGR rates at less than half the 10 year rate. The following table shows dividend CAGR for 1, 3, 5, and 10 years along with the annual dividend payments since 2002. An easy to use compound annual growth rate calculator can be found here.

Year20022003200420052006200720082009201020112012
Annual Dividend Paid0.66001.59001.79002.31002.83003.46004.75004.64004.74005.78006.4900*
CAGR Growth Rates10 YR 5 YR 3 YR 1 YR
25.68% 13.41% 11.83% 12.28%

*Indicated dividend for 2012.

CNOOC has been pretty consistent increasing dividends every year. They have increased dividends 9 of the last 10 years with 2009 being the only blemish in its increase record since 2002 with a dividend decrease. Dividend decreases are really bad for a dividend growth investor but we'll let CNOOC slide as that time frame was extremely tough for a lot of companies and the dividend increase history since 2002 is otherwise pretty strong.
Let's see what kind of future cash flow we might expect from CEO at the 3 year dividend CAGR over a 20 year period. The following table gives yield on cost and cumulative dividends paid at the 3 year CAGR rate of 11.83%. My initial cost is my averaged-in purchase price of $198.87 per share.

YearYield on Initial Cost at 10 YR CAGRCumulative Dividend ReturnYield on Initial Cost at 5 YR CAGRCumulative Dividend ReturnYield on Initial Cost at 3 YR CAGRCumulative Dividend Return
13.26%3.26%3.26%3.26%3.26%3.26%
24.10%7.36%3.70%6.96%3.65%6.91%
35.15%12.51%4.19%11.15%4.08%10.98%
46.47%18.98%4.76%15.91%4.56%15.54%
58.13%27.11%5.39%21.30%5.10%20.64%
610.22%37.33%6.12%27.41%5.70%26.34%
712.85%50.18%6.94%34.35%6.38%32.72%
816.15%66.33%7.87%42.22%7.13%39.85%
920.29%86.62%8.92%51.14%7.97%47.82%
1025.50%112.13%10.12%61.26%8.92%56.74%
1132.05%144.18%11.47%72.73%9.97%66.71%
1240.29%184.46%13.01%85.74%11.15%77.87%
1350.63%235.09%14.76%100.50%12.47%90.34%
1463.63%298.73%16.74%117.24%13.95%104.28%
1579.97%378.70%18.98%136.22%15.60%119.88%
16100.51%479.21%21.53%157.75%17.44%137.32%
17126.32%605.53%24.41%182.16%19.51%156.83%
18158.76%764.29%27.69%209.85%21.81%178.64%
19199.53%963.82%31.40%241.25%24.39%203.03%
20250.77%1214.59%35.61%276.86%27.28%230.31%

The table shows that we might expect a yield on investment of 27.28% at the end of 20 years at the 3 year CAGR. We can also see that the dividends paid out over the next 14 years effectively pay for our original investment since 104.28% of the initial investment is paid back in dividends over that period. While CEO does indeed show a decelerating dividend growth rate, the future cash flow continues to be appealing especially with the most recent dividend increase exceeding the 3 year CAGR. Note that the 10 year CAGR analysis is purely there for comparison purposes and that a CAGR over 25% over the next 20 years is extremely unlikely.
The future cannot be predicted obviously and this analysis is only based on the anticipated continued dividend payouts by CNOOC at an estimated CAGR of 11.83%. There is no guarantee that CNOOC will continue to pay dividends or increase dividends at the rate used for this analysis. Of course, an accelerated growth rate would be great but that's why we must continue to monitor the business of the companies we are invested in to make sure we have the best chance of achieving our long term goals.

CNOOC passes the dividend test for now and will continue to be a core position in my portfolio.

Source: CNOOC: Dividend Growth Analysis For Long-Term Investors