Major oilfield services provider Halliburton Company (HAL) increased its first quarter 2013 dividend by 39% to 12.5 cents per share (50 cents per share annualized). The new distribution will be paid on Mar 27, 2013 to shareholders of record as of Mar 6.
The company also revealed its plan to distribute around 15% to 20% of its annual net income by way of dividend, subject to approval by the board of directors.
The dividend hike reflects continued strong performance by the company, backed by solid operating results, good investments and a diligent execution of its strategic plan. We believe that Halliburton will be able to generate sufficient cash flows for its shareholders in the coming years, which will likely be backed by strong operating performances and good management decisions.
As of Dec 31, 2012, the company had approximately $2.5 billion in cash/cash equivalents and $4.8 billion in long-term debt, representing a debt-to-capitalization ratio of 23.4%.
We believe that the increase in dividend will boost investors’ confidence in the stock, thereby driving unit value.
The company currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Halliburton is among the top three players in each of its product/service categories, and is present in all major hydrocarbon-producing regions of the world. The company enjoys strong relationships with both publicly traded and national oil companies worldwide.
However, the company has operations in over 70 countries, with approximately a fifth of its total operating income coming from international markets. As such, the company is exposed to risks associated with doing business abroad. Such risks include embargoes or expropriation of assets, exchange rate risks, terrorism and political/civil sentiment.
But there are certain other oilfield services providers that are expected to perform well in the coming 1 to 3 months. These include Compressco Partners, L.P. (GSJK) with a Zacks Rank #1 (Strong Buy), and Core Laboratories N.V. (CLB) and Dawson Geophysical Company (DWSN) with Zacks Rank #2 (Buy).
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