Halliburton Unlikely to Raise Dividends Amid Bleak Fundamentals

Halliburton (NYSE:HAL) has been sustaining its quarterly dividend of $0.18 per share over the last 12 quarters, unlike its previous history of raising the quarterly dividend each year. Its return on equity ratio has also declined significantly in the trailing twelve months. Moreover, the company’s share price appreciation is heavily dependent on crude oil prices, which are likely to remain under pressure.

Consequently, Halliburton appears like a poor play for the dividend growth investors. At the moment, the company plans to use its cash to fund acquisitions to support its revenue generation in a low pricing environment. Recently, Halliburton announced plans to acquire Norwegian oil services company Aker Solutions.

The company is also in late-stage discussions to buy Oklahoma-based Summit ESP, a fast-growing oilfield equipment supplier. However, the company failed to complete its merger with Baker Hughes, due to opposition from U.S. and European anti-trust regulators.

Although, the company has narrowed its losses in the first quarter, its future fundamentals appear bleak, amid the potential slump in global oil investments. Following a growth in oil prices due to OPEC led measures; oil prices have been losing their shine over the last three months, thanks to higher production from the U.S. players.

The oil output cut agreement has lowered the demand for oilfield services companies in the key international markets, including Saudi Arabia and Russia.

Moreover, lower than expected price outlook and the latest dip in oil prices have also been forcing U.S. players to reduce their investments in growth opportunities. For instance, the Energy Information Administration recently reduced their U.S. oil output forecast to 9.9 million barrels a day, amid a lower oil price outlook. Thus, Halliburton and other oilfield services companies are likely to remain under pressure in the coming days, which could lower their potential to increase cash returns.

The author does not own Halliburton shares.

Alexander is an analyst for EconomicCalendar.com who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.