Questor share tip: Wood Group dividend up 25pc

Strong performance in the energy sector helped offset Wood Group’s weaker engineering division, which accounts for 46pc of the company’s profit and about a third of revenues.

The engineering arm provides equipment and pipelines, as well as maintenance work, for oil wells on land and at sea.

The company said that engineering profits fell 9pc during the first half despite revenues climbing 4pc. The division is being hit as oil majors cut back on new projects and Canada’s heavy oil sands market suffers a sharp reduction in activity.

Mr Keiller said he is confident of hitting full-year revenue and profit targets. Market expectations are for pre-tax profits of $444m (£266m), on revenues of $7.23bn, giving 99c, or 59.5p, in earnings per share

In international markets, PSN has been held back for the past three years by a contract with Petroleum Development Oman. Wood Group said that it still expects to exit this contract next year.

The company announced an interim dividend of 8.9 cents, up 25pc from 7.1 cents in the previous year, going ex-dividend on August 27 and payable on September 25. The intention is to increase the full-year dividend by 25pc and another 10pc next year.

Questor thinks that the full-year dividend increase could be nudged above 25pc. The payout is covered five times by the adjusted earnings and provides a yield of 2.3pc.

The shares, trading on 12.6 times forecast earnings, are a hold.

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