Natural gas producer and pipeline firm The Williams Companies Inc. (WMB) raised its quarterly cash dividend to 25 cents per share ($1.00 per share annualized), representing an increase of 25.0% over the previous payout and double the dividend distributed in December 2010.
The new dividend, payable on December 27 to shareholders of record as on December 9, 2011, will cost the company an additional $29.4 million every three months.
Williams has recently bolstered its long-term earnings and cash flow visibility on the back of higher commodity prices, improved production figures across most of the shale plays, and stronger margins for olefins.
The dividend hike not only highlights the company’s commitment to create value for shareholders but also underlines Williams’ new policy – a continued 10-15% annual dividend growth over the next few years – that requires it to pay out substantially all of the distributions it gets from its partnership, Williams Partners L.P. (WPZ).
Tulsa, Oklahoma-based The Williams Companies is an integrated energy firm that primarily finds, produces, gathers, processes and transports natural gas primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania.
The company divides its business into four segments: Exploration & Production, Williams Partners (including the company’s 84%-owned master limited partnership Williams Partners L.P.) Midstream Canada & Olefins, and Other.
The Williams Companies currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Longer-term, we are maintaining our Neutral recommendation.
We like the company’s strong business mix, the growth opportunities in its low-risk upstream model and its relatively stable fee-based midstream services. We also think that the recent consolidation program will allow Williams to simplify its structure, drive growth and unlock value for shareholders. Furthermore, the company’s proposal to split into two separate entities is expected to be long-term accretive.
However, Williams’ leveraged balance sheet and exposure to volatility in prices for natural gas and natural gas liquids offset these strengths and remain key areas of concern, in our view. Consequently, we see the stock performing in line with the broader market.
WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment