Oil and gas operator, Anadarko Petroleum Corp.’s (APC) board of directors announced its approval of a 100% hike in the quarterly dividend rate payable on Sep 25, 2013, to shareholders of record at the close of business on Sep 11, 2013. The company doubled its quarterly dividend to 18 cents from the prior 9 cents.
Anadarko Petroleum has consistently performed well recording healthy earnings surprises in the last four quarters, which led to an average earnings beat of 18.65%. This paved the way for the current dividend increase.
Its strong financial performance in the second quarter of 2013 also prompted the company to take this step. It registered an 85.4% increase in the cash balance to $4.6 billion in the second quarter from $2.5 billion as of Dec 31, 2012. This was supported by a 25.2% year-over-year increase in operating cash flow to $2.5 billion at the end of Jun 30, 2013.
The hike in the quarterly cash dividend speaks of Anadarko’s efforts to boost shareholder wealth. Although the company’s dividend history has not been that striking, we believe the current dividend raise will most certainly capture investors’ attention in the stock.
The sound balance sheet position will encourage the company’s ongoing multiple exploration ventures in the Gulf of Mexico and Mozambique, which will accentuate its returns. Moreover, the shale resources are offering attractive growth opportunities, which the company will capitalize through its sizeable interests in the resource-rich East Texas and Wattenberg horizontal plays.
We anticipate these factors will help position Anadarko Petroleum for future growth. However, it needs to tread cautiously owing to the lingering threat of political instability in Africa. The company at the moment carries a Zacks Rank #3 (Hold).
Other operators in the sector hiking their dividends in the first half of 2013 include Occidental Petroleum Corp. (OXY), with a raise of 18.5% to 64 cents, Magellan Midstream Partners LP (MMP) increasing the quarterly cash distribution by 21% to 50.8 cents and Markwest Energy Partners, L.P. (MWE) raising the cash distribution by 5.0% to 84 cents.
Based in The Woodlands, Texas, Anadarko Petroleum presently has a market capitalization of $40.88 billion.
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