Global large-cap energy equipment maker, National Oilwell Varco (NOV) has recently increased its quarterly cash dividend payment by 100% to 26 cents per share, up from 13 cents per share paid in the previous quarter. The new dividend will be paid on Jun 28, 2013, to shareholders of record as on Jun 14, 2013.
Importantly, National Oilwell has been increasing its payout every year since it commenced paying dividends in 2009. If the current dividend is maintained for a year, the annualized dividend payout of the company would be $1.04 per share.
Based on the closing price of $70.17 as on May 20, 2013, the proposed dividend affirms a yield of 1.5%. A steady dividend payout facilitates the long-term strategy of the company to provide attractive risk-adjusted returns to its stockholders.
Management believes the dividend hike shows consistently good performance and is reflective of its solid operating results.
Houston, Texas based National Oilwell is a world leader in the design, manufacture, and sale of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide. The company reached its current form following the Mar 2005 merger between National Oilwell and Varco International. National Oilwell organizes its operations in three business segments: Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission.
With new competitors entering the market and reduced capital expenditure by the drilling contractors, National Oilwell has seen its new equipment package pricing fall around 10% below the level achieved during the peak of 2007–2008. In particular, the company’s margins have been hit hard by the ongoing North American drilling slump. We expect the situation – characterized by tepid demand and weak pricing – to normalize only sometime in late 2013.
National Oilwell currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
However, in the energy sector three firms that are expected to significantly outperform the broader U.S. equity market over the next one to three months are CNOOC Ltd. (CEO), InterOil Corporation (IOC) and EPL Oil & Gas Inc. (EPL). All three firms retain a Zacks Rank #1 (Strong Buy).
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