Contract drilling services provider Helmerich & Payne Inc. (HP) has increased its quarterly common stock dividend by more than 100% to 15 cents per share (60 cents per share annualized). The new dividend will be paid on March 1, 2013 to shareholders of record as of February 15, 2013.
The strength of Helmerich’s business model reflects the company’s commitment toward returning value to shareholders with its strong cash generation capabilities. Helmerich’s latest payout hike marks the 40th dividend increase in as many years.
Helmerich has a strong capital deployment policy through regular share repurchase and payment of dividends. During fiscal 2012, the company repurchased shares worth$77.60 million. It has also paid common stock dividends amounting to $30.0 million in fiscal 2012.
We believe that the dividend hike and share repurchase programs will boost investors’ confidence in the stock, thereby driving share value.
Helmerich & Payne is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. The company specializes in shallow to deep drilling in oil and gas-producing basins of the U.S. and in drilling for oil and gas in international locations.
However, Helmerich & Payne’s results are exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Any significant reduction in energy prices could depress the level of exploration and production activity, resulting in a corresponding decline in demand for the company’s services.
Helmerich & Payne currently retains a Zacks #3 Rank (short-term Hold rating), in line with its rig contractor peer Patterson-UTI Energy Inc. (PTEN). Longer term, we are maintaining our Neutral recommendation on Helmerich.
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