Oil refiner Phillips 66 (PSX) has increased its quarterly common stock dividend by 25% to 31.25 cents per share. The new dividend will be paid on Mar 1, 2013 to shareholders of record as of Feb 18. The company paid a dividend of 25 cents during the previous quarter.
The strength of Phillips 66’s business model reflects the company’s commitment towards returning value to shareholders along with its strong cash generation capabilities.
Phillips 66 has a good capital deployment policy through share repurchase and payment of dividends. During the fourth quarter of 2012, the company returned more than $400 million to shareholders through $157 million in dividend payments and $245 million in share repurchases. The board of directors also approved an additional share repurchase program of $1 billion, increasing the total repurchase program to $2 billion.
We believe that the increase in dividend and share repurchase programs will boost investor confidence in the stock, thereby driving share value.
The company currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
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. 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 has emerged as an integrated downstream company with most of the Midstream and Chemicals segments, as well as power generation and certain technology operations included in the Emerging Businesses segment.
In addition to Phillips 66, there are certain other energy operators like Calumet Specialty Products Partners L.P. (CLMT) and Global Partners L.P. (GLP) that offer value and are worth buying now. Both these firms sport a Zacks Rank #1 (Strong Buy).
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