How Dividend Increase Could Affect Williams Companies Stock


Dec. 4 2020, Updated 10:53 a.m. ET

Williams Companies rose after dividend raise

Williams Companies (WMB), the midstream C corporation GP (general partner) of Williams Partners (WPZ), opened ~2% higher on Tuesday, February 21, 2017, after it announced a 50% increase in dividends from $0.20 per share to $0.30 per share. The company had earlier announced a dividend cut to $0.20 per share from $0.64 per share, effective in 3Q16. However, WMB is still trading below its levels at the start of 2017.

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Williams Companies’ YTD returns   

WMB’s stock fell 9.4% between the beginning of 2017 and February 20, 2017. It rose 21.2% in 2016. In comparison, WMB peers Enbridge (ENB) and Energy Transfer Equity (ETE) have lost 0.3% and 1.3%, respectively, in 2017. Kinder Morgan (KMI) has risen 5.1%. WMB and most of its peers are still trading below where they were trading before the rout in energy prices. We’ll look at this more in the next article. The Alerian MLP ETF (AMLP), which consists of 25 energy MLPs (master limited partnerships), has risen 3.0% in 2017. WMB underperformed the benchmark ETF by ~12%.

Williams Companies’ stock performance drivers

Williams Companies’ underperformance relative to AMLP can be attributed to the sharp decline in its stock prices following the financial reorganization announcement, which included removal of IDRs from Williams Partners’ (WPZ) capital structure, conversion of an economic GP (general partner) interest in WPZ to non-economic GP interest, and WPZ’s distribution cut. The measure is negative for Williams Companies in the short run. However, the company expects to benefit from it in the long run.

The midstream sector has seen a number of deals in recent months involving the removal of IDRs or the simplification of organizational structure considering the prolonged low price environment and the high cost of equity capital. ONEOK (OKE) recently announced the acquisition of its MLP subsidiary, ONEOK Partners (OKS). For more details, read ONEOK Acquires ONEOK Partners for $9.3 Billion.


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