Like many other energy stocks, 2022 was a good year for Baker Hughes (BKR); as of December 13, including dividends, its shares returned 24% year-to-date vs. the S&P 500’s 16% loss, asserts Harry Domash, income specialist and editor of Dividend Detective.
Baker Hughes's oilfield services include onshore and offshore exploration, drilling and maintenance services; the firm also produces exploration and drilling equipment and provides services and equipment for downstream operations including transportation and refining.
Many analysts are expecting a market downturn in 2023 — probably including the energy sector. Nevertheless, there are several reasons to believe that Baker Hughes’s winning streak could continue.
1) Big oil is finally getting the message big time: carbon dioxide emissions must be reduced. Baker Hughes, already a major services and equipment supplier, intends to become the leading supplier of carbon reduction equipment and systems.
It has already made several acquisitions to help it achieve that goal. For instance Baker recently agreed to acquire the Power Generation division of BRUSH Group, an established equipment manufacturer that specializes in electric power generation and management for the industrial and energy sectors.
2) Baker is expanding its presence in Asia by opening a new oilfield services chemicals manufacturing facility in Singapore, enabling manufacturing optimization and faster delivery of fit-for-purpose chemical solutions.
3) Baker has embarked on a multi-faceted program to increase profit margins and increase cash flow. Consequently, for next year, analysts are forecasting EPS to total $1.66 per share, up 79% vs. 2022.
4) Baker Hughes has just been added to the Nasdaq-100 Index (December 19), thereby increasing demand from ETFs and mutual funds tracking that index.
On the dividend front, Baker recently raised its quarterly payout by 6% to $0.19 per share, which recently equated to a 2.8% dividend yield.
As is the case for most energy stocks, Baker Hughes share price will react to crude oil price changes. But, thanks to its focus on providing technologies for cutting carbon dioxide emissions, long-term, Baker Hughes is likely to outperform most oil industry stocks.