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North American energy firm Williams Companies Inc. (WMB - Analyst Report) increased its quarterly cash dividend payment by 4.2% to 33.875 cents per share, up from 32.5 cents per share paid in the fourth quarter of 2012 and 25.875 cents per share in the year ago period. The increased dividend is payable on March 25, 2013, to shareholders of record as on March 8, 2013.

Importantly, the latest payout is consistent with Williams Companies’ plan to increase dividend every quarter. If the revised dividend is maintained for the rest of the year, then the annualized dividend payout of the company would be $1.36 per share.

Based on the closing price of $33.80 as on January 17, 2013, the increased dividend affirms a yield of 4.0%. A steady dividend payout facilitates the long-term strategy of the company to provide attractive risk-adjusted returns to its stockholders.

Last year, the company’s full year dividend was $1.20 per share. Management believes that Williams Companies will likely increase its annual dividend for 2013 and 2014 by 20% each.

The dividend hike reflects continued strong performance by Williams Companies, backed by solid operating results, good investments and a diligent execution of its strategic plan. We believe that the company will be able to generate sufficient cash flows for its shareholders in the coming years, backed by strong operating performances and good management decisions.

Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transportation of natural gas. Boasting a widespread pipeline system, Williams Companies is one of the largest domestic transporters of natural gas by volume.

Williams Companies divides its business into three segments: Williams Partners that includes the company’s 72% owned master limited partnership Williams Partners L.P. (WPZ - Snapshot Report), Midstream Canada & Olefins, and Other.

Williams Companies currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Williams Companies’ midstream assets, which are less sensitive to commodity prices, help the company to maintain a steady stream of revenue and cash flow even if natural gas prices stay low.

However, we remain concerned about Williams Companies’ high debt levels, which leave it vulnerable to an extended drop in commodity prices.

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