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NOV’s Dividends: Key Drivers

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What salvaged the revenue fall for 9M17?

National Oilwell Varco (NOV) provides components used in oil and gas drilling and is a global provider of oilfield services. Its revenue fell 51% in 2016 and 4% in 9M17. Lower revenue from sales and services led to the decline in 2016. Every segment—Rig Systems, Rig Aftermarket, Wellbore Technologies, and Completion & Production Solutions—drove the decline in 2016. The decline in revenue from Rig Systems and Rig Aftermarket was offset by the other segments in 9M17.

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What salvaged the EPS fall in 9M17?

The cost of revenue fell 37% and 11% in 2016 and 9M17, respectively, which led to a 103% fall in gross profit for 2016 before growing 103% in 9M17. Operating expenses decreased 33% and 56% in 2016 and 9M17, respectively. This fall was due to goodwill impairment in 2016 and its absence in 9M17. The company recorded negative operating income in 2016 and 9M17, which decreased significantly in 9M17. Interest and financial costs rose 2% in 2016 before falling 4% in 9M17. All of these developments translated into negative adjusted net earnings and EPS (earnings per share) for 2016 and 9M17. 9M17 was further affected by a higher number of outstanding shares.

Dividend yield and price performance

The dividend yield for National Oilwell Varco has fallen significantly in 2016 and 2017 due to significant dividend cuts in both periods.

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Drivers

The company combined its Rig Systems and Rig Aftermarket reporting segments into a single segment called Rig Technologies in 4Q17. The company expects the Wellbore Technologies and Completion & Production Solutions segments to keep driving the rig equipment demand.

Stacking up against the broad indexes

A PE of 0x and a dividend yield of 0.6% compares to a sector average PE and a dividend yield of 158.4x and 3.7%, respectively. The SPDR S&P 500 ETF (SPY) has a PE of 18.7x and dividend yield of 1.7%. The SPDR Dow Jones Industrial Average ETF (DIA) has a PE of 17.8x and a dividend yield of 1.9%.

Dividend ETF with exposure to National Oilwell Varco

The WisdomTree US MidCap Dividend ETF (DON) has a PE of 23.6x and a dividend yield of 5.2%.

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