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U.S. Silica (SLCA) Reduces Quarterly Cash Dividend by 68%

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U.S. Silica Holdings, Inc. SLCA has recently announced a reduction in its quarterly cash dividend. The company’s board has opted to lower the quarterly cash dividend payout to 2 cents per share from 6.25 cents, marking a 68% decline. The dividend will be paid out on Apr 3, 2020 to shareholders of record as of Mar 13, 2020.

The company stated that the move is in sync with its capital allocation strategy. U.S. Silica believes that reducing dividend is in the best interest of the company as well as shareholders. Lower dividend enables the company to make additional investments in the growing industrial and logistics businesses. Moreover, it provides more flexibility to reallocate capital for share repurchases and debt reduction.

Notably, U.S. Silica’s cash and cash equivalents plunged roughly 85% year over year to $187.3 million at the end of third-quarter 2019. Long-term debt rose around 3% year over year to $1,216.8 million.

Shares of U.S. Silica have tumbled 58.1% in the past year compared with the industry’s 2% decline.

In third-quarter 2019, the company witnessed delays in purchasing decisions by certain customers in its Industrial & Specialty Products unit. Higher level of uncertainty in global industrial markets, intensified by tariffs, political uncertainty and increasing risk of economic slowdown made it difficult for the company to provide forecast for the business. The fourth quarter is usually characterized by a seasonal decline in profitability of around 10%, the company stated during its third-quarter earnings call.

The company expects a slowdown in North America completion activity, which will affect margins in the Oil & Gas unit in the fourth quarter.

U.S. Silica is scheduled to release the fourth quarter and 2019 results on Feb 25, 2020, before the opening bell.

Zacks Rank & Key Picks

U.S. Silica currently carries a Zacks Rank #5 (Strong Sell).

Few better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Sibanye Gold Limited and Impala Platinum Holdings Limited IMPUY, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has an expected long-term earnings growth rate of 29%. The company’s shares have rallied 94.5% in the past year.

Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have returned 140.6% in the past year.   

Impala Platinum has an expected long-term earnings growth rate of 26.5%. The company’s shares have surged 213.7% in the past year.

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