Natural gas producer and pipeline firm The Williams Companies Inc. (NYSE:WMB) raised its quarterly cash dividend to 25 cents per share ($1.00 per share annualized), representing an increase of 25.0% over the previous payout and double the dividend distributed in December 2010. The new dividend, to be paid to shareholders in December 2011, will cost the company an additional $29.4 million every three months.
Williams, which reported better-than-expected second-quarter results last month, has bolstered its long-term earnings and cash flow visibility on the back of higher commodity prices, improved production figures across most of the shale plays, and stronger margins for olefins.
The dividend hike not only highlights the company’s commitment to create value for shareholders but also underlines Williams’ new policy – a continued 10-15% annual dividend growth over the next few years – that requires it to pay out substantially all of the distributions it gets from its partnership, Williams Partners L.P. (NYSE:WPZ).
Williams also said that it remains committed to proceed with the separation of its upstream unit from its pipeline business by the first quarter of 2012. However, before the tax-free spin-off, the energy infrastructure entity will move ahead with a partial initial public offering of the exploration and production business when market conditions are appropriate.
Tulsa, Oklahoma-based The Williams Companies is an integrated energy firm that primarily finds, produces, gathers, processes and transports natural gas primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania.
The company divides its business into four segments: Exploration & Production, Williams Partners – that includes the company’s 84%-owned master limited partnership Williams Partners L.P. – Midstream Canada & Olefins, and Other.
The Williams Companies currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.