Recently, natural gas-focused energy company Questar Corporation (STR) increased its quarterly common stock dividend by 5 % to 17 cents per share (68 cents per share annualized). The new dividend will be paid on September 10, 2012 to shareholders of record as of August 17.
Questar’s latest payout hike marks the 40th dividend increase in as many years. The company has paid dividends in each of the last 271 quarters.
The strength of Questar’s business model reflects the company’s commitment towards returning value to shareholders with its strong cash generation capabilities. Prior to this revision, the company had increased its quarterly dividend by 1 cent per share in November 2011.
Questar has a strong capital deployment policy through regular share repurchase and payment of dividends. During the second quarter of 2012, the company repurchased 2.62 million shares for an aggregate cost of $52.2 million at an average price of $19.96 per share.
Moreover, it has paid common stock dividends amounting to $57.8 million to shareholders during the first half of 2012.
We believe that the increase in dividend and share repurchase programs will boost investors’ confidence in the stock, thereby driving share value.
Founded in 1922, Salt Lake City, Utah-based Questar Corporation is a natural gas-focused energy company with three principal subsidiaries – Wexpro Company, Questar Pipeline, and Questar Gas Company.
Questar is characterized by a cost-effective business strategy that generates lucrative return on equity. The company is also consistently broadening its customer base and enjoys an enviable market share as compared to its peers which include AGL Resources, Inc. (GAS), National Fuel Gas Company (NFG), EQT Corporation (EQT) and Atmos Energy Corporation (ATO).
Overall, we believe the company will be able to generate meaningful earnings and dividend growth in the coming years. An above-average credit quality adds to the positive sentiment.
Shares of Questar currently carry a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are also maintaining our long-term Neutral recommendation on the shares.
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