- On Monday, July 21, WPZ announced it would be increasing its quarterly dividend by 1.33%.
- WPZ's upcoming earnings could exceed street estimates if the company can demonstrate increases in both its net income and distributable cash flows.
- Trend behavior could improve well into the second half of the year, especially if WPZ can meet and/or exceed analysts' earnings expectations for the upcoming quarter.
Since my primary investment objective revolves around income, dividend-related events are always something I tend to keep an eye on. It is these types of events that 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 units of Williams Partners LP (NYSE:WPZ).
A Brief Summary of the Company
Headquartered in Tulsa, Oklahoma, Williams Partners LP is an energy infrastructure company, focused on connecting North America's hydrocarbon resource plays to growing markets for natural gas and natural gas liquids (also known as NGLs). It should be noted that the company operates in a number of segments that include: Northeast G&P, Atlantic-Gulf, West, and NGL & Petchem Services.
Recent Dividend Behavior
On Monday, July 21, Williams Partners LP announced a quarterly dividend increase of $0.012/unit, which brings its upcoming dividend payout to $0.9165/unit. It should be noted that the increase will be paid on August 8 for unit-holders of record as of August 1. This boost represents a 1.33% increase from its prior dividend of $0.9045/unit which was paid to investors on April 30.
Based on the company's dividend behavior over the last 12 months, it should come as no surprise that I foresee its next quarterly dividend hike will take place in October 2014, and that I expect that increase to be at least $0.01/unit but no more than $0.0175/unit.
Upcoming Earnings Outlook
When it comes to the company's upcoming earnings, there are a number of things potential investors should consider. For example, analysts are currently calling for WPZ to earn $0.41/unit in terms of EPS for Q2 when earnings are announced on July 30 (which is $0.05/unit higher than what the company had reported during Q1 2014, and $0.10/unit higher than the company had reported during the year-ago period).
In order to meet and/or exceed its quarterly EPS estimates, I'd like to see an increase of at least 2.5% in terms of the company's net income, an increase of at least 4% in terms of the company's distributable cash flows, a 1.5% increase in terms of the partnership's total segment-based profit and lastly, an increase of at least 3% in terms of the company's revenues. If the above mentioned criteria are met and/or exceeded, there's a very good chance that current EPS per share estimates could be surpassed.
Recent Trend Behavior
On Monday, units of WPZ, which currently possess a market cap of $23.37 billion, a forward P/E ratio of 21.92, and a distribution yield of 6.87% ($3.66), settled at a price of $53.27/share. Based on a closing price of $53.27/share, shares of WPZ are trading 1.09% below their 20-day simple moving average, 0.14% above their 50-day simple moving average, and 6.14% above their 200-day simple moving average.
These numbers indicate a short-term downtrend and mid-to-long term uptrend for the stock, which generally translates into a buying mode for most long-term investors. If the company can demonstrate a stronger-than-expected earnings performance when it announces Q2 results on July 30, there's a very good chance the company's trend behavior will continue to move in a very positive direction.
For those of you who may be considering a position in Williams Partners, I strongly recommend keeping a close eye on the company's recent dividend behavior which has demonstrated a solid uptrend over the last year and its ability to demonstrate steady increases in net income, distributable cash flow and its segment-based profits as each of these catalysts will play a role in the company's long-term earnings growth.