In terms of dividend raises, February has gotten off to a fine start. As the final days of January gave way to the new month, a fresh set of companies declared lifts.
Among these were ConocoPhillips (COP 0.74%), Exelon Corporation (EXC +1.68%), and Juniper Networks (JNPR +0.00%). Without further ado, let's get into it.
Image source: Getty Images.
ConocoPhillips
Oil and gas major ConocoPhillips is bumping its quarterly dividend nearly 8% higher, to just under $0.29 per share. It's also expanding its existing stock buyback program by $500 million to a total of $2 billion.
The company finished its fiscal 2017 in style, with a dramatic improvement on the bottom line. Adjusted net profit flipped to $545 million, from a $318 million loss of Q4 2016. Production increased by 4% to over 1.2 million barrels of oil equivalent (BOE/D) per day.
The improvements were helped greatly by the recovery of oil prices. Although they're still under the levels reached before the 2014 crash, they recently climbed to a three-year peak.
WTI Crude Oil Spot Price data by YCharts
Meanwhile, the company purchased a set of assets in Alaska from peer Anadarko Petroleum. Also so far this young year, it has already retired $2.25 billion in debt after repaying $7.6 billion in 2017. Total outstanding borrowings now stand at roughly $17.5 billion.
Those are good moves, and although fortunes can change quickly in the energy business, ConocoPhillips' fundamentals are looking good just now. This new dividend feels safe to me, and hopefully it'll be supported by the oil price.
The new ConocoPhillips dividend is to be paid on March 1 to investors of record as of Feb. 12. Its yield would be a shade under 2% on the current stock price, beating the current 1.8% average of dividend-paying stocks on the S&P 500. The payout ratio is 63%.
Exelon Corporation
In line with a new dividend policy, electricity, natural gas, and nuclear utility conglomerate Exelon is raising its quarterly payout by 5%, to just under $0.35 per share.
Because of a mix of factors, Exelon has had a tough time matching strong revenue growth with improvements on the bottom line. We saw that in the company's Q3, in which it boosted its revenue by 4% (to $8.68 billion) but saw its adjusted net profit slip by 2% to $821 million.
There's a chance that dynamic will change in the near future. In recent years, the company has spent handsomely on improving reliability. A pull-back in these efforts will save on capital expenditures, which rose by almost 50% from fiscal 2012 to 2016. Exelon anticipates that its spend in the crucial utilities segment will drop by almost 9% from 2017 to 2020.
That rise in capex has driven free cash flow into the red; operating cash flow, on the other hand, has risen at healthy rates in recent years, including an 11% increase in fiscal 2016. So a meaningful reduction in spending should have a sharply positive effect on free cash flow. Considering that, I feel that the company's new dividend will be sustainable, at the least.
EXC Free Cash Flow (TTM) data by YCharts
Exelon's next dividend will be distributed on March 9 to stockholders of record as of Feb. 15. Its payout ratio is 41%, while its yield comes in at 3.7%.
Juniper Networks
Juniper Networks is about to pull the trigger on its first dividend increase. The networking equipment and services specialist has declared that its new quarterly payout will be $0.18 per share, an 80% improvement over the $0.10 it's paid since initiating the distribution in late 2014.
On top of that, it has launched a $2 billion share buyback program, $750 million of which will be used in an accelerated repurchase initiative in the company's current quarter.
Juniper Networks' stock has basically traveled sideways over the past year, not least because the company has posted declines in revenue and profitability lately. The current frame, Q1 of fiscal 2018, isn't expected to be anything to write home about, either, if we go by the company's disappointing guidance.
Juniper Networks is trying, but not particularly succeeding, to pivot its business from networking hardware to cloud-based solutions. But the take from the latter is slipping. In Q4, cloud net revenue dropped precipitously, by almost 40% to $259 million.
Although the company is still well in the black in terms of free cash flow, an 80% dividend raise is steep, as is a front-loaded share repurchase program. If I were an investor, I'd be concerned for this company's prospects, and for the future of its payout.
JNPR Free Cash Flow (TTM) data by YCharts
Juniper Networks is dispensing its upcoming dividend on March 22 to stockholders of record as of March 1. It yields a theoretical 2.7%, and its payout ratio is 34%.
Mixed results
To sum up, two out of the three raisers for this installment of our series are looking good and fundamentally solid, for the most part, while there are doubts about No. 3. Either way, it was an interesting and active week for income investors. Here's hoping we'll get more as we move through the year.
