Oilfield service company Core Laboratories N.V. (CLB) increased its quarterly common stock dividend by 14.2% to 32 cents per share ($1.28 per share annualized). The new dividend will be paid on February 22, 2013 to shareholders of record as of January 22.
The strength of Core Laboratories' business model reflects the company's commitment toward returning value to shareholders with its strong cash generation capabilities. Prior to this revision, the company had increased its quarterly dividend by 3 cents per share in January 2012.
Core Laboratories has a strong capital deployment policy through regular share repurchase and payment of dividends. During the third quarter of 2012, the company repurchased 283,513 shares for an aggregate cost of $33,191,000 at an average price of $117.07 per share. Moreover, it has paid common stock dividends amounting to $13,252,000 to shareholders during the same period.
As on September 30, 2012, Core Laboratories had cash and cash equivalents of $24.7 million. The company generated free cash flow of $42.0 million.
We believe that the increase in dividend and share repurchase programs will boost investor confidence in the stock, thereby driving share value.
Amsterdam, Netherlands-based Core Laboratories N.V provides reservoir management and production enhancement services to the oil and gas industry on a global basis. The company operates in over 50 countries and divides its operations in three principal business lines: Reservoir Description, Product Enhancement, and Reservoir Management.
Core Labs has operations in over 50 countries, with approximately 50% of its total revenue coming from international markets. In particular, the company has collaborated extensively with Brazil's state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR) to undertake a number of reservoir analysis ventures in onshore and offshore plays of the country.
However, with Core Labs' dependence on foreign makets, it is also exposed to risks associated with doing business abroad. Such risks include embargoes and/or expropriation of assets, exchange rate risks, terrorism and political/civil sentiment in critical countries like Iran, Iraq, Nigeria and Venezuela.
The company currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.