How National Oilwell Varco’s Dividend Cut Affected Its Dividend Yield
Why did NOV’s revenues fall in 2015 and 2016?
National Oilwell Varco’s (NOV) revenues fell 31.0% and 51.0% in 2015 and 2016, respectively. Its Rig Systems, Rig Aftermarket, Wellbore Technologies, and Completion & Production Solutions segments drove this decline. Its US and international regions recorded falling revenues.
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How did NOV’s EPS perform in 2015 and 2016?
National Oilwell Varco’s (NOV) costs and expenses fell 15.0% and 36.0% in 2015 and 2016, respectively. NOV registered significant goodwill and intangible asset impairment charges in 2015 and 2016.
NOV’s operating income fell 111.0% in 2015 and turned negative. In 2016, its negative operating income further deteriorated. Other expenses increased 67.0% in 2015 compared to 7.0% in 2016.
These factors translated into 12.0% EPS (earnings per share) growth in 2015 and a fall of 67.0% in 2016. Share buybacks further enhanced its EPS numbers.
How did NOV’s revenues and EPS perform in 9M17?
National Oilwell Varco’s revenues for 9M17 fell 4.0%. Its Rig Systems and Rig Aftermarket revenues fell, offset by growth in its Wellbore Technologies and Completion & Production Solutions segments.
NOV’s costs and expenses decreased 24.0% as a goodwill impairment was recorded in 9M16. Its operating loss fell 90.0% as a result. Other expenses decreased 53.0% in 9M17.
Although the company recorded negative EPS, this metric showed marked improvement. The company generates enough free cash flow to pay off its dividends. However, its free cash flow balance has decreased over the years.
How has NOV’s dividend yield evolved?
National Oilwell Varco took a 67.0% dividend cut in 2016 and 2017. Its stock price has lost 8.0% on a year-to-date (or YTD) basis compared to 12.0% growth in 2016. This trend explains the downward sloping dividend yield curve.
National Oilwell Varco has a dividend yield of 0.6% and a YTD return of -7.7%. These numbers compare to a sector average dividend yield of 3.5% and a PE ratio of 137.7x.
Comparison with broad indexes
The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 22.7x, and a YTD return of 15.5%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3%, a PE ratio of 21.2x, and a YTD return of 18.7%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x and a YTD return of 25.4%.
The Miller/Howard Strategic Dividend Reinvestor ETN (DIVC) is a dividend fund with exposure to National Oilwell Varco. The Vanguard Dividend Appreciation ETF (VIG) is a dividend ETF with exposure to NOV. It has a PE ratio of 23.5x and a dividend yield of 2.0%.