Oil refiner Phillips 66 (PSX) has increased its quarterly common stock dividend by 25% to 31.25 cents per share ($1.25 per share annualized). The new dividend will be paid in the first quarter of 2013. The board of directors also approved a $1.0 billion share repurchase program in addition to that announced in the third quarter of 2012.
Phillips 66’s latest payout hike marks the second dividend increase since its inception in May 2012. The company paid a dividend of 25 cents during the previous quarter. The company expects to use its operating cash flows to fund the buyback program.
The strength of Phillips 66’s business model reflects its commitment towards returning value to shareholders with its strong cash generation capabilities.
Phillips 66 has a good capital deployment policy through share repurchase and payment of dividends. During the third quarter of 2012, the company’s board of directors approved a share repurchase program of $1.0 billion.
As of September 30, 2012, company had cash and cash equivalents of $4.4 billion.
We believe that the increase in dividend and share repurchase programs will boost investor confidence in the stock, thereby driving share value.
Phillips 66, an independent publicly traded company, was formed after the spin-off of the refining/sales business of ConocoPhillips (COP) in May 2012. The move has resulted in the creation of the largest refining company in the U.S. (with a capacity of 2.4 million barrels per day) and the largest exploration and production player based on oil and gas reserves.
The new downstream company, Phillips 66, is headquartered in Houston, Texas. In addition to the refining, marketing and transportation businesses, Phillips 66 also includes most of the Midstream and Chemicals businesses, as well as power generation and certain technology operations included in the Emerging Businesses segment, to create an integrated downstream company.
Phillips 66 currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.
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