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Fluor Corporation Up on Dividend Hike

Zacks Equity Research

Share prices of Fluor Corporation (FLR) rose 1.6% on Friday, Feb 7, following the company’s announcement of a 31% increase in quarterly dividend on Feb 6. Fluor has increased the quarterly dividend to 21 cents per share from 16 cents per share. The increased dividend will be paid on Apr 2, 2014 to shareholders of record on Mar 4.

The current rise comes almost after a couple of years of its prior dividend increase declared on Mar 1, 2012, when it was raised by 108% to 26 cents.

Based on the closing share price of $77.21 on Feb 7, 2014, the increased dividend implies a dividend yield of 1.09%. The current dividend yield is better than that of some other engineering and construction companies, VSE Corp. (VSEC) with a yield of 0.87% and KBR, Inc. (KBR) with a yield of 1.03%.

With approximately 164.8 million shares outstanding as at third quarter end, Fluor needs to dish out about $34.6 million per quarter as dividend. The company’s solid financial position well cushions the payout. At the end of the third quarter, its cash and marketable securities stood at $3.0 billion, reflecting an increase of more than 15% from that at year-end 2012. The company’s retained earnings also increased by 11% to $4.01 million compared to $3.60 million as on Dec 31, 2012.

Fluor has strategically aligned its priorities to benefit its shareholders and enhance dividend growth. This dividend hike was supported by its disciplined capital allocation, strong and flexible balance sheet position along with a consistent cash flow.

Fluor has been benefiting from the increased demand in its Oil & Gas and Power businesses. Also, given the nature of the company’s operations, which primarily include long-cycle projects, the amount of backlog in the company’s income statement reflects its scope for revenue generation in future.

Fluor currently holds a Zacks Rank #2 (Buy). Another stock in news that has also raised its dividend recently is AO Smith Corp. (AOS), which increased its quarterly dividend by 25% to 15 cents per share.

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