CAM Cameron International Corp.

Oilfield services company National Oilwell Varco (NOV) raised its quarterly cash dividend to 12 cents per share (48 cents per share annualized), representing an increase of approximately 9% over the previous payout. The new dividend is payable on December 16, to shareholders of record as of December 2, 2011.

National Oilwell Varco, which recently reported better-than-expected third-quarter results, has bolstered its long-term earnings and cash flow visibility on the back of the company’s strong backlog, which now stands at more than $10 billion. We believe that the dividend hike not only highlights the company’s commitment to create value for shareholders but also underlines the oilfield equipment supplier’s healthy financial condition and confidence in its business going forward.

Houston, Texas-based National Oilwell Varco, formerly National Oilwell, is a global leader in the design, manufacture and sale of comprehensive systems, components, products and equipment used in oil and gas drilling and production worldwide.

The company reached its current form following the March 2005 merger between National Oilwell and Varco International. Its operations are organized in three business segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services.

Even though National Oilwell Varco – which ranks ahead of Cameron International Corp. (CAM) as the biggest U.S. oilfield equipment maker – has a Zacks #2 Rank (Buy rating) for the short run, we are Neutral on the shares for the longer term.

We like National Oilwell Varco’s healthy backlog, solid balance sheet and strength in international operations, particularly in the Middle East and Brazil. Last year’s acquisition of Advanced Production and Loading PLC (“APL”) has further boosted National Oilwell’s earnings visibility by expanding its floating production storage and offloading vessel (FPSO) product line; one of the fastest-growing areas of the offshore market. The recent influx of offshore rig awards adds to the positive sentiment.

However, we think the current valuation is fair and adequately reflects the company’s future growth prospects. Moreover, with markets remaining competitive and pricing likely to be weak, we don't see any obvious catalyst in National Oilwell’s business to significantly push the stock price higher.

 
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