Williams Companies cuts stock dividend

Monday, July 22nd 2002, 12:00 am
By: News On 6

Williams Companies reported a second-quarter loss Monday that sent its stock tumbling. After closing last Friday at a little over $5, the stock sank to barely $2, which is the lowest level in almost 20 years.

Williams executives were unable to comment Monday, but a local analyst gave us some perspective on what Monday’s losses mean for the company and for investors. David Healey, UBS Painewebber: "The street does not mind bad news. It doesn’t mind good news, but it doesn’t like uncertainty. The worst thing you can have in the market is uncertainty."

The only thing that's certain is Williams Companies stock is down, way down. Not only did the company report another losing quarter, it also cut the common stock dividend to a penny from 20 cents. The move was an attempt to slash Williams' red ink, but it's probably going to keep investors from seeing green. "What that means is people that own the common stock are not going to be getting paid a dividend while they wait for it to do something. Its really a stock you would own strictly for growth now."

Growing is the opposite of what Williams is doing now. They're selling off key assets like pipelines and refineries to increase their cash flow and decrease their debt. And it looks like there might be more layoffs to come, although a Williams spokesperson couldn't say when or where. There is also some good news. "They did make a lot of good points about the asset base about the performance on those assets and how things are in pretty good shape overall and improving. They just have to get out of this slump."

Getting out of the slump is easier said than done. Williams is still being investigated by federal officials in connection with the California energy crisis. And debt from its former spin-off Williams Communications is still dragging the company down. But -- all in all -- Healey says this move could turn the company around. "Its moderately bad news on the front that it was unexpected but at the same time from the company stand point, if in fact they can do what they say they're going to do it might save them from going under."

David Healey says Williams is still a viable company even with the stock plummeting.