National Oilwell Ups Dividend by 77% - Analyst Blog

Global large-cap energy equipment maker, National Oilwell Varco Inc. NOV announced an increase in its quarterly cash dividend to 46 cents per share ($1.84 annualized), up almost 77% from 26 cents. The new dividend will be paid on Jun 27 to shareholders of record as of Jun 13.

However, the news failed to get a favorable response from investors. On the contrary, National Oilwell shares slid marginally to $80.44 on May 15, down from the previous close of $81.03. This could probably be because of the fact that the dividend hike was already anticipated, as the company had given indications of such an increase during its last quarter results.

National Oilwell's management stated that this increase reflects the company's confidence in its financial condition and future cash flow growth. As of Mar 31, 2014, the company had $3.7 billion in cash. Management believes that this strong cash flow position enabled it to declare the latest increase in payout.  

Notably, this is the second major dividend hike by the company. Last year, National Oilwell had doubled its payout to 26 cents. Such increases, if continued, would make National Oilwell a lucrative choice for value investors.

Houston, TX-based National Oilwell is a world leader in the design, manufacture and sale of comprehensive systems, components, products and equipment used in oil and gas drilling and production worldwide.

National Oilwell currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the oilfield machinery and equipment industry such as Matrix Service Company MTRX, Cameron International Corporation CAM and USA Compression Partners, LP USAC. While Matrix Service sports a Zacks Rank #1 (Strong Buy), Cameron International and USA Compression hold a Zacks Rank #2 (Buy).