Halliburton: Value, Strength, Quality

08/21/2014 7:00 am EST


Charles Carlson

Editor, DRIP Investor

One investment theme that should have legs is the growth opportunities in the energy sector, as demand for oil and gas should grow as economies improve in the US and especially overseas, observes Chuck Carlson, dividend expert and editor of DRIP Investor.

The huge gas reserves that are now being exploited in the US are another growth kicker. Finally, signs of an easing of the ban on US exports of crude oil bode well for the industry and its participants.

One firm that should be a major player in the expansion of the energy sector is Halliburton (HAL). The firm is one of the largest energy services providers in the world, with more than 80,000 employees in some 80 countries and annual sales of more than $30 billion.

The company is expected to earn roughly $4 per share in 2014 and $5.18 per share in 2015. Those numbers, especially the 2015 estimate, could prove conservative if the pace of drilling accelerates over the next 18 months.

The increased popularity of horizontal drilling, which represents nearly two-thirds of all US rigs operating in 2013, is a plus for the company given its experience in the field.

Halliburton has an Overall Quadrix score of 92 (out of a possible 100), with above-average scores across all Quadrix categories (Value, Operating Momentum, Relative Price Strength, Financial Strength, Quality, and Earnings Estimates).

The company has boosted its dividend twice in the last six quarters and now pays a quarterly dividend of $0.15 per share. Given the company’s payout ratio of just 15% based on expected 2014 earnings, it would not be surprising to see the dividend lifted again this year.

The stock has good momentum and should outperform the overall market over the next 24 months. The stock has ample upside potential and represents a solid play on an attractive sector.

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