- On Tuesday, May 13, Anadarko announced it would be increasing its quarterly dividend by 50%.
- Comparatively speaking, Anadarko is trading at just under 19x forward earnings whereas two of its peers are trading at just under 25x and 31x their respected forward earnings.
- Recent trend behavior signals a buying mode for most long-term investors.
As a dividend-driven investor, dividend-related events (such as the increase or decrease of a company's quarterly payout) are always something I tend to pay close attention to, since they have a tendency to influence my decision in terms which stocks I should keep on my radar. With that said, and in the wake of its latest dividend increase, I wanted to highlight several reasons why I've chosen to stay bullish on shares of Anadarko Petroleum (NYSE:APC).
Anadarko Increases Its Quarterly Dividend 50%
On Tuesday, May 13, Anadarko Petroleum announced a quarterly dividend increase of $0.09/share, which brings its upcoming dividend payout to $0.27/share. It should be noted that the increase will be paid on June 25 for shareholders on record as of June 11. Not only does this boost represent a 50% increase from its prior dividend of $0.18/share (paid on March 26), it was also in line with its previous increase of $0.09/share that was announced on August 7, 2013.
Recent Performance & Trend Behavior Should Indicate A Continued Uptrend
On Tuesday, shares of APC, which currently possess a market cap of $50.95 billion, a forward P/E ratio of 18.84, and a dividend yield of 1.07% ($1.08), settled at a price of $100.88/share.
Based on their closing price of $100.88/share, shares of APC are trading 1.26% above their 20-day simple moving average, 9.39% above their 50-day simple moving average, and 13.63% above their 200-day simple moving average. It should be noted that these numbers indicate a short-term and mid-to-long term uptrend for the stock, which generally translates into a buying mode for most near-term traders and many long-term investors.
Comparative Forward P/E Ratios Set Southern Company Apart From Its Peers
Although the above referenced numbers indicate a long-term uptrend for the company's stock, I actually think APC's share price of $100.88/share offers investors a considerable point of entry. Why? Well, I think that when shares are trading at a much better forward P/E ratio than a number of their sector-based peers, a great buying opportunity is created for most long-term investors.
As of Tuesday's close, Anadarko Petroleum's forward P/E ratio of 18.84 was much lower than the forward P/E ratio of both Pioneer Natural Resources (NYSE:PXD) (forward P/E ratio of 30.48 as of 5/13) and Cabot Oil & Gas (NYSE:COG) (forward P/E ratio of 24.79 as of 5/13), which signals a greater level of affordability for those who may be looking to establish a position in Southern Company, especially when compared to a number of its peers.
Costs Related To Anadarko's Natural Gas Activity May Rise Over The Next Several Years
One of the things both potential investors and existing shareholders should note is the fact that Anadarko's costs related to its activity in the Marcellus Shale formation could see a considerable increase over the next several years. How come, you ask? By considering the fact that $630 million in drilling fees will be brought into the state of Pennsylvania by the end of 2014 and the fact a number of critics still think those fees are too low, I strongly believe we could see an average increase of 5% per year over the next three years.
With that said, I estimate Anadarko's fees in the region could potentially exceed $15 million by the end of 2017 if the number of natural gas wells the company currently has stays at 6,500. If Anadarko continues to expand within the Marcellus formation as has been the case over the last few years, these particular costs could rise considerably over the next three years and such costs could hurt both long-term earnings and long-term revenue growth.
For those of you who may be considering a position in Anadarko, I strongly recommend keeping a close eye on the company's recent trend performance, its ability to continue to maintain its dividend while and its ability to continue to enhance shareholder value over the next 12-24 months, as each of these factors could play a role in the company's long-term growth.