uploads/2016/07/Dividend-and-yield-1.jpg

Why Superior Energy Services Canceled Its Dividend

By

Updated

Superior Energy Services canceled its dividend

In March, Superior Energy Services’ (SPN) management disclosed that SPN’s board has elected to eliminate its quarterly dividend per share (or DPS). SPN aims to improve cash through dividend cancellation as the crude oil market remains under pressure.

SPN’s net income in fiscal 1Q16 deteriorated further compared to a quarter earlier, prompting SPN to suspend its DPS. From 1Q15 to 1Q16, SPN kept its DPS unchanged at $0.08. SPN’s industry peer McDermott International (MDR) doesn’t pay dividends.

Article continues below advertisement

Superior Energy Services’ dividend yield

Dividend yield, expressed as dividend per share relative to share price, was steady from fiscal 1Q15 to 1Q16. From March 31, 2016, to June 22, 2016, Superior Energy Services’ share price rose 34% while it cancelled dividends. SPN is also 0.2% of the iShares Core S&P Mid-Cap ETF (IJH).

SPN’s CEO on dividend elimination

SPN spent $48 million in fiscal 2015 on dividends that it can save annually though dividend elimination. 

In the fiscal 1Q16 conference call, SPN’s CEO commented, “The elimination of our dividend is consistent with our goal of preserving cash during this downturn. Also in line with this goal, our executive officers have all taken reduced base salaries. We will continue to be thoughtful in our approach to uses of cash and cost reductions in the future and will attempt to maintain as much readiness for a recovery as possible. This downturn has been severe in extent and duration but we believe our cost reduction efforts will allow for improved financial performance when industry spending levels begin to increase.”

Next, we’ll discuss Superior Energy Services’ free cash flows.

Advertisement

More From Market Realist