As someone with a knack for dividend investing, dividend-related events have a tendency to influence my decision in terms of which stocks I should keep on my radar and which ones I should not. 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 Helmerich & Payne (NYSE:HP).
A Brief Summary of the Company:
Headquartered in Tulsa, Oklahoma, Helmerich & Payne primarily operates as a contract drilling company in North and South America. It provides drilling rigs, equipment, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms, tension-leg platforms, and spars in offshore areas.
Dividend Summary and Recent Behavior:
On Wednesday, June 5, Helmerich & Payne announced a quarterly dividend increase of $0.065/share, which brings its upcoming dividend payout to $0.6875/share. It should be noted that the increase will be paid on September 2 for shareholders on record as of August 15. This boost represents a 10% increase from its prior dividend of $0.625/share, which was paid to shareholders on May 13.
Most Recent Earnings Performance:
The company released its quarterly earnings results on the afternoon of April 24, and demonstrated what I believe to be a fairly strong quarter (aside from its international results which I will touch on briefly a bit later). The company reported earnings of $1.59 a share, which was $0.12 above analysts' estimates. The company's revenues totaled $893.4 million for the quarter, while it demonstrated an increase of $19.1 million in terms of its US-based land operations and a 3.6% increase in the number of segment-based revenue days.
One of the things that stood out most for me during the company's most recent earnings announcement were the numbers surrounding its rig utilization. Rig utilization for the company's U.S. land segment was 86% for this year's second fiscal quarter, compared with 82% for last year's second fiscal quarter and 84% for this year's first fiscal quarter. In other words, the company demonstrated a 2% increase in terms of its rig utilization on a quarter-over-quarter basis and a 4% increase in terms of its rig utilization on a year-over-year basis.
Although the company's earnings looked fairly solid, it was Helmerich & Payne's international results that spooked investors and subsequently resulted in near-term sell-off of the stock. According to the company's earnings announcement, its international land operations generated revenues of $85.5 million (which were down 9.1% on a year-over-year basis), while demonstrating an average daily rig revenue of about $37,000 (a decrease 8.8% on a year-over-year basis), and a daily rig margin of roughly $10,918 (which was also down 1.2% on a year-over-year basis). Unless the company can improve its international land-based operations, near-term earnings could see a negative impact until at least FQ3 or even FQ4 2014.
For those of you who may be considering a position in Helmerich & Payne, I strongly recommend keeping a close eye on the company's recent trend performance, its ability to continue to maintain its dividend over the next several years and its ability to turn around and subsequently improve upon its international land-based operations, which demonstrated disappointing numbers during its most recent quarter.
Disclosure: I am long HP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.