Laser-Focused On Dividends -- WMB -- September 8, 2022

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The Williams Companies (WMB).

Williams Companies is a major player in the natural gas pipeline. Williams controls pipelines for natural gas, natural gas liquids, and oil gathering, in a network stretching from the Pacific Northwest, through the Rockies to the Gulf Coast, and across the South to the Mid-Atlantic. Williams’ core business is the processing and transport of natural gas, with crude oil and energy generation as secondary operations. The company’s footprint is huge – it handles almost one-third of all natural gas use in the US, both residential and commercial.

The firm’s natural gas business has brought strong results in revenues and earnings. In the most recent quarter, 2Q22, showed total revenues of $2.49 billion, up 9% year-over-year from the $2.28 billion reported in the year-ago quarter. The adjusted net income of $484 million led to an adjusted diluted EPS of 40 cents. This EPS was up 48% y/y, and came in well above the 37 cent forecast.

The rising price of natural gas and the solid financial results have given the company's stock a boost – and while the broader markets are down year-to-date, WMB shares are up 26%.

The company has also been paying out a regular dividend, and in the most recent declaration, in July for a September 26 payout, management set the payment at 42.5 cents. This marked the third quarter in a row at this level. The dividend annualizes to $1.70 and yields 5.3%. Even better, Williams has a history of keeping reliable dividend payments – never missing a quarter – going back to 1989.

This stock has attracted the attention of Justin Jenkins, a 5-star analyst from Raymond James, who writes of WMB: “The Williams Companies’ (WMB) attractive mix of core business stability and operating leverage via G&P, marketing, production, and project execution is still under-appreciated. WMB's large cap, C-Corp., and demand-pull natural gas-focused characteristics (and supply-push tailwinds in several G&P regions and the Deepwater) position it well for both the short- and long-term, in our view. Potential buybacks and JV optimization offers additional catalysts throughout the year, bolstering an anticipated premium valuation.”

Jenkins goes on to give WMB shares a Strong Buy rating, and his $42 price target implies a 31% upside for the next 12 months. 

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