There is no shortage of research that points to the fact that companies that pay a dividend outperform non-payers. That same research will point out that those companies that can grow their payout are even more likely to outperform. With that as a backdrop, let's take a look at three energy companies that recently opened up their wallets.
Serving oilfields yields great returns
Oil-field service company, Halliburton (NYSE:HAL) earlier this year boosted its dividend by 39%. It also announced that it plans to lock dividend payments in at 15%-20% of its net income going forward. That big boost has pumped the company's yield to 1.25%.
The dividend boost is just part of the story here, as Halliburton began a systematic share repurchase program under its authorized $1.7 billion buyback plan. Along with earnings, the company reported that it had already bought back 1.2 million shares for $50 million. Since it started buying back shares in 2006, Halliburton has returned $3.3 billion to shareholders by repurchasing 97 million shares.
Despite on-going Macondo litigation from the BP oil spill, the company has a rock solid balance sheet. Halliburton's confidence in maintaining this dividend policy is buoyed by peer-leading results, and expectations of continued growth both in North America and internationally. If you take look at these two together, Halliburton has a long runway of future outperformance ahead of it.
Keeping it in the family
Last week, the Kinder Morgan (NYSE:KMI) family of companies including Kinder Morgan Partners (UNKNOWN:KMP.DL) and El Paso Pipeline Partners (UNKNOWN:EPB.DL), all announced distribution hikes. Kinder Morgan boosted its dividend by 19% over last year's first quarter payout based on strong results from Kinder Morgan Partners, with some help from El Paso. Those two partnerships announced year-over-year payout increases of 8% and 22%, respectively.
Don't expect these pay raises to stop anytime soon. Kinder Morgan Partners has an organic growth pipeline of more than $12 billion in projects to keep it busy over the next five years, while El Paso has a number of drop-down opportunities from Kinder Morgan, as well as the potential to participate in the LNG export market. As these projects come online, they'll drive further distribution growth across the family.
While some of its peers in the utility space are slashing payouts, American Electric Power (NYSE:AEP) actually hiked its dividend by 4.3% this quarter. CEO Nicholas Akins noted that, "This change reflects our continued commitment to increase shareholder value and achieve payout ratios that are in line with our regulated peers." Commitment is one thing, but it's the company's growing assets that are really driving the increased payout.
Those assets include the nation's largest electricity transmission system as well as the company's John W. Turk Jr. Power Plant in Arkansas. That plant is the first coal-fueled power plant in the United States to use advanced ultra-supercritical technology. It just came online in 2012, and it's already exceeding expectations. AEP has plans to add to these assets by increasing its capital expenditures from $3.1 billion in 2012, to $3.6 billion this year. As these new projects come online, combined with management's disciplined cost controls, it provides the necessary fuel to keep driving that dividend higher in the future.
Foolish bottom line
While the energy industry is very capital intensive, many companies have plenty of cash left over be returned to shareholders. If you believe the research, that means each name on this list has a chance to outperform over the long term. However, the one name that's most interesting is Halliburton.
Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends El Paso Pipeline Partners LP, Halliburton, and Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.