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Quanta Services (PWR) Lures Investors With 25% Dividend Hike

Zacks Equity Research

Ushering in good news for Quanta Services, Inc.’s PWR shareholders, the company recently announced a hike in dividend payout. This hike is reflective of its confidence in the stability of the base business, long-term prospects and solid financial position. The move will also enable it to enhance stockholder value.

The company boosted (approximately by 25%) quarterly dividend to 5 cents per share (20 cents annually) from 4 cents (16 cents annually). This new dividend, approved by the board of directors, will be paid on Jan 16, 2020 to its stockholders of record as of Jan 2. The dividend yield, based on the latest payout and Dec 12 closing market price, is approximately 0.5%.

Notably, dividend increase not only enhances shareholder returns but also raises a stock’s market value. In fact, companies often tend to attract new investors and retain the old ones through this strategy. So far this year, shares of the company have gained 38% against the Zacks Engineering - R and D Services industry’s 2.9% decline.

 

What Led to the Dividend Increase?

Quanta Services has been delivering robust performance over the last few quarters. Notably, the company’s earnings grew 30.3% year over year in the first nine months of 2019, backed by strong segmental performance. Quanta Services believes that the delivery of energized services differentiates it from competitors and helps win new businesses. Owing to healthy end-market prospects and the recent acquisitions, the company increased its full-year 2019 revenue, EBITDA and earnings per share expectations.

The company ended third-quarter 2019 with a record backlog of approximately $13.28 billion and 12-month backlog of $7.56 billion. This compares favorably with $12.34 billion of total backlog and $6.98 billion of 12-month backlog at 2018-end. Also, the reported backlog was up from total backlog of $12.21 billion and 12-month backlog $7.48 billion reported at the end of third-quarter 2018. This demonstrates the strength of its core operations.

Currently, the company is pursuing a three-pronged growth strategy that is focused on timely delivery of projects to exceed customer expectation; leveraging the core business to expand in complementary adjacent service lines and exploring new service lines.

Going forward, Quanta Services expects a strong rebound in end-markets served as it enters a renewed multiyear up-cycle for businesses. Quanta Services’ optimism stems from healthy backlog levels, which are expected to grow further. The company remains confident about end-market prospects of both its segments, namely Electric Power and Pipeline and Industrial Infrastructure Services.

Quanta Services — which shares space with Gates Industrial Corporation PLC GTES, AECOM ACM and KBR, Inc. KBR in the same industry — currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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