A soon-to-be gusher of a dividend
However, the real reason we’re taking a closer look at Halliburton Company (NYSE:HAL) today has to do with its renewed focus on shareholders. While Halliburton has always strived to boost sales and its bottom line, it’s improved on two initiatives meant to drive value straight into shareholders’ pockets.
The first action became effective as of Feb. 1 and includes the company’s commitment to make systemic share repurchases of up to $1.7 billion. If Halliburton’s board were to utilize this entire buyback, it would reduce its outstanding share count by roughly 4.8%, adding value to shareholders’ remaining shares.
The more intriguing aspect of Halliburton Company (NYSE:HAL)’s plan to return value to shareholders was its 39% quarterly dividend increase from $0.09 to $0.125. Halliburton’s board has a plan to return 15% to 20% of net income to shareholders in the form of a dividend each year. At $0.50 annually, that translates to about $466 million paid out in dividends.
Based on Wall Street’s estimated 2014 EPS of $3.92, this means Halliburton — assuming it pays out the maximum 20% of net income as a dividend — could increase its annual payout from $0.50 to as high as $0.79 in less than two years.
Some investors will look at Halliburton’s 1.2% yield and call me nuts for even suggesting the company as a potential income play. To those skeptics I’d like to point out that Halliburton has already doubled its payout to shareholders over the past eight years, has paid a dividend to shareholders since 1947, and could be entering a new period of rapid growth if fracking becomes a popular oil and gas retrieval method. At a mere 10 times forward earnings and with a projected growth rate of 16% over the next five years, Halliburton Company (NYSE:HAL) looks to me like a solid candidate for those looking for future dividend income and share price appreciation.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Seadrill and Transocean and recommends Halliburton and Seadrill.
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