Teekay Offshore Partners L.P. (TOO) Stock Tanks After Huge Dividend Cut


As an investor, one of the first things I look at when buying a stock is 1) whether or not the company pays a dividend, and 2) what that dividend amount is. I know that I’m not alone with this method of finding new stocks to invest into, as this is how many investors and fund managers also work.

For investors like me, we try and avoid stocks that drastically reduce their dividends out of the blue. Teekay Offshore Partners L.P. (NYSE:TOO) today became one of those companies as they cut their dividend payments by a whopping 80%. The new dividend payment has been reduced to just $0.11 per share (quarterly) from $0.56.

“Despite significant weakness in the global energy and capital markets, Teekay Offshore’s businesses remain strong,” commented Peter Evensen, Chief Executive Officer of Teekay Offshore GP LLC. “The Partnership’s cash flows remain stable and growing, supported by a large and well-diversified portfolio of fee-based contracts with high quality counterparties,” Mr. Evensen continued. “However, as a growing MLP, Teekay Offshore does require capital and there is currently a dislocation in the capital markets relative to the stability of our businesses such that the Partnership’s cost of equity has increased to the point where it is currently not an economically attractive source of capital. Based on the upcoming capital requirements for our committed growth projects and bond maturities, coupled with the uncertainty regarding how long it will take for the energy and capital markets to normalize, management and the Partnership’s Board of Directors believe that it is in the best interest of the Partnership’s unitholders to conserve our internally generated cash flows to fund future growth projects and reduce our debt levels.”

The stock is down 51.28% or $4 following the news, hitting $3.8 per share. About 8.60M shares traded hands or 1561.80% up from the average. TOO has declined 64.91% since May 14, 2015 and is downtrending. It has underperformed the S&P500 by 62.65%.

From a total of 3 analysts covering Teekay Offshore (NYSE:TOO) stock, 1 rate it a “Buy”, 0 a “Sell”, and 2 a “Hold”. This means that 33% of the ratings are positive. The highest target price is $23 while the lowest target price is $21. The mean of all analyst targets is $22 which is 478.95% above today’s ($3.8) stock price. Teekay Offshore was the topic of 3 analyst reports since August 4, 2015 according to the firm StockzIntelligence Inc. RBC Capital Markets maintained shares on August 13 with a “Sector Perform” rating. Global Hunter Securities upgraded TOO stock in a recent report from August 4 to a “Accumulate” rating.

The institutional sentiment increased to 1.13 in Q2 2015. It’s up 0.05, from 1.08 in 2015Q2. The ratio increased, as 10 funds sold all their Teekay Offshore Partners L.P. shares they owned while 29 reduced their positions. 15 funds bought stakes while 29 increased their total positions. Institutions now own 54.47 million shares which is 9.73% more than the previous share count of 49.64 million in 2015Q2.

Berson & Corrado Investment Advisors Llc holds 2.25% of its total portfolio in Teekay Offshore Partners L.P., equating to 276,028 shares. Evergreen Capital Management Llc owns 470,082 shares representing 1.76% of their total US portfolio. Moreover, Advisory Research Inc has 1.39% of their total portfolio invested in the company, equating to 6.79 million shares. The Utah-based Ronna Sue Cohen has a total of 1.16% of their portfolio invested in the stock. Avenir Corp, a -based fund reported 897,464 shares owned.

Teekay Offshore Partners L.P. is a provider of marine transportation, oil production, storage, towage and floating accommodation services to the offshore oil industry focusing on the fast-growing, deep-water offshore oil regions of the North Sea and Brazil. The company has a market cap of $823.78 million. The Firm operates shuttle tankers, floating production, storage and off-loading units, floating storage and off-take (FSO) units, and conventional crude oil tankers. It currently has negative earnings. As of December 31, 2014, the Company’s fleet consisted of 34 shuttle tankers, including two chartered-in vessels and one HiLoad Dynamic Positioning (DP) unit; seven FPSO units, including the Libra FPSO and the Petrojarl I FPSO conversion and upgrade projects; six FSO units, and four conventional oil tankers, in which its interests range from 50% to 100%.