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Williams Companies Dividend Cut More Severe Than Expected, But Goldman Says Buy On Weakness

Williams Companies Dividend Cut More Severe Than Expected, But Goldman Says Buy On Weakness
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Williams Companies Inc (NYSE: WMB) reported its 2Q16 results relatively in line with expectations after Monday's market close.


Goldman Sachs’ Theodore Durbin mentioned that the EBITDA for Williams Partners LP (NYSE: WPZ) of $1,065 million came in just below the estimate and the consensus.

However, the central segment beat the estimate by 9 percent, offset by lower-than-anticipated volumes, as well as unit margins in the other segments.


Williams Partners guided to 2016 EBITDA of $4.3 billion, in line with expectations, with growth caped for 2016 and 2017 ahead of the estimates.

Williams Companies confirmed that it expects Canadian asset sales of more than $1 billion.

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Dividend Cut

The company also announced a reduction in its quarterly dividend from $0.64 to $0.20 per share, representing a 69 percent cut, beginning in 3Q16, well ahead of the estimated cut of 50 percent.

“WMB expects to reinvest $1.7 billion in WPZ equity through 2017, and resume dividend increases in 2018. WPZ plans to hold its quarterly distribution flat at $0.85/unit through 2017,” Durbin said.

Although the analyst believes the results and guidance were robust, the dividend cut was much higher than the estimate and the consensus, despite being within the range of investor expectations.

“We would Buy WMB on any weakness following the dividend cut, as we expect strong FCF in 2018–2020,” Durbin added.

At time of writing, Williams Companies was trading up 4.61 percent at $23.60, while Williams Partners was up 3.23 percent at $35.80.

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Latest Ratings for WMB

Apr 2018Deutsche BankInitiates Coverage OnBuy
Apr 2018BarclaysMaintainsEqual-WeightEqual-Weight
Mar 2018Bank of AmericaMaintainsBuyBuy

View More Analyst Ratings for WMB
View the Latest Analyst Ratings

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