National Fuel Declares Quarterly Dividend and Announces New Share Repurchase Program
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Insights
The announcement by National Fuel Gas Company (NFG) regarding the initiation of a stock repurchase program, alongside the declaration of a quarterly dividend, is a significant development for investors and stakeholders. The repurchase program, capped at $200 million, is a strategic move that could potentially lead to earnings per share (EPS) accretion. By reducing the number of shares outstanding, EPS may increase if net income remains constant or grows, which is often viewed positively by the market.
Moreover, the company's commitment to complete the buyback by the end of fiscal 2025 suggests a confident outlook on future cash flows and earnings stability. The historical consistency in paying dividends, with an increase for the past 53 years, underlines the company's financial health and disciplined capital management approach. Investors typically interpret such actions as a signal that the company considers its stock to be undervalued and it is also a way to return capital to shareholders in a tax-efficient manner.
However, it is crucial to monitor the funding of this repurchase program. If it is financed through debt, it could affect the company's leverage ratios and financial flexibility. On the other hand, if it is funded through free cash flow, it reflects strong operational performance. The absence of preferred stock in the capital structure simplifies the analysis of the repurchase's impact on common shareholders.
The energy sector, where National Fuel operates, is typically characterized by its cyclical nature and sensitivity to commodity prices. The company's diversified business model across exploration, production, pipeline, storage, gathering and utility segments may provide a buffer against sector-specific risks. The share repurchase program could be interpreted as a strategic initiative to optimize capital allocation and enhance shareholder value amidst this backdrop.
Investors often look for companies with a clear strategy for capital distribution, which includes both dividends and share buybacks. National Fuel's approach aligns with industry practices where mature companies with stable cash flows return excess capital to shareholders. This strategy can be particularly appealing to income-focused investors and those looking for lower volatility in their investments.
It is also important to consider the market's reaction to such announcements. While a dividend increase and share repurchases are generally viewed favorably, the actual impact on the stock price will depend on the execution of the program and the broader market sentiment towards the energy sector. The timing and scale of the repurchases, as disclosed, will be contingent on market conditions, which adds an element of uncertainty to the potential outcomes of the program.
From an economic standpoint, National Fuel's announcement reflects broader economic trends such as corporate tax reforms, interest rates and the availability of capital. In a low-interest-rate environment, share repurchases are a cost-effective way for companies to deploy capital. However, as interest rates rise, the opportunity cost of share repurchases increases, potentially making them less attractive compared to other investment opportunities.
The company's ability to increase dividends consistently over an extended period indicates a resilient business model capable of weathering economic cycles. This resilience is particularly noteworthy given the volatility in energy prices and regulatory changes that can impact the sector. The long-term view adopted by the company, with a target completion date for the repurchase program, suggests strategic planning that takes into account economic forecasts and market conditions.
Finally, the repurchase program's lack of a definitive end date allows for flexibility in response to economic shifts. This flexibility is a prudent measure, as it enables the company to adapt to changing economic scenarios without being locked into a fixed repurchase schedule that might not align with future financial conditions.
WILLIAMSVILLE, N.Y., March 11, 2024 (GLOBE NEWSWIRE) -- National Fuel Gas Company (NYSE: NFG) (the “Company”) announced today that its Board of Directors has approved payment of a regular quarterly dividend of 49.5 cents per share on the Company’s common stock. The dividend is payable April 15, 2024, to stockholders of record at the close of business March 28, 2024.
The Company also announced an enhancement to its long history of returning capital to shareholders with the authorization of a program to repurchase up to
“This announcement demonstrates National Fuel’s continued focus on returning capital to our shareholders,” said David P. Bauer, President and Chief Executive Officer of the Company. “National Fuel has paid a dividend for 121 consecutive years and has increased it for each of the last 53 years. This track record highlights our ability to deliver growing earnings and cash flows over the long-term, all while maintaining capital discipline. The new share repurchase program underscores the strong outlook for our business and provides a means by which we can enhance value for shareholders.”
Under this program, repurchases will be made from time to time by the Company in the open market as conditions allow, or in privately negotiated transactions, including through the use of trading plans intended to qualify under SEC Rule 10b5-1, in accordance with applicable securities laws and other restrictions.
Except in the case of repurchases under a Rule 10b5-1 trading plan, the volume, nature, price and timing of the repurchases are at the sole discretion of management, dependent on the stock price, market conditions, applicable securities laws, including SEC Rule 10b-18, corporate and regulatory requirements, capital and liquidity needs or other factors. The Company’s Board of Directors may suspend, discontinue, terminate, modify, cancel or extend the share repurchase program at any time and for any reason. The Company has approximately 92.1 million shares of common stock outstanding. It has no preferred stock outstanding.
National Fuel is a diversified energy company headquartered in Western New York that operates an integrated collection of natural gas assets across four business segments: Exploration & Production, Pipeline & Storage, Gathering, and Utility. Additional information about National Fuel is available at www.nationalfuel.com.
Certain statements contained herein, including statements identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “believes,” “will,” “may,” and similar expressions, and statements other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including statements regarding the amount and timing of repurchases of our common stock, if any, involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. While National Fuel’s expectations, beliefs, and projections are expressed in good faith and are believed to have a reasonable basis, actual results may differ materially from those projected in forward-looking statements. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: (1) National Fuel’s ability to estimate accurately the time and resources necessary to implement new practices; (2) governmental/regulatory actions and/or market pressures to reduce or eliminate reliance on natural gas; and (3) the other risks and uncertainties described in (i) National Fuel’s most recent Annual Report on Form 10-K at Item 7, MD&A, and Quarterly Reports on Form 10-Q at Item 2, MD&A, under the heading “Safe Harbor for Forward-Looking Statements,” and (ii) the “Risk Factors” included in National Fuel’s most recent Annual Report on Form 10-K at Item 1A. National Fuel disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof. Because of these risks and uncertainties, readers should not place undue reliance on these forward-looking statements or use them for anything other than their intended purpose.
FAQ
What is the amount of the regular quarterly dividend announced by National Fuel Gas Company (NFG)?
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What is the amount authorized for the share repurchase program by National Fuel Gas Company (NFG)?
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