Williams Companies Gets Buyout Offer – What to Do
The Dividend Hunter portfolio recommendation Williams Companies (NYSE:WMB) was approached with a $64 per share buyout offer over the weekend. As a result the share price has jumped 25% and is trading at around $60 this morning (Monday, June 22).
This is great news if you have followed the recommendation and own some WMB shares. I now recommend that investors who have WMB continue to hold. If the company does get bought out, it will be at a price higher than the $64 offer. To a great extent, $60 is more in line with where the shares should trade based on the yield and dividend growth prospects. If nothing further happens to buy out the company, I would not be surprised to see the share price drop back into the mid $50’s, which would be a better entry value for dividend focused investors.
If you want to get in on a similar investment, take a look at another Dividend Hunter recommendation, Kinder Morgan Inc. (NYSE:KMI). KMI has an energy midstream business and business model that is similar to WMB. Williams is actually following the Kinder lead as it works to absorb its controlled MLP into the corporation. If WMB is worth $60, KMI is worth at least $50 (really close to $60 also, but I don’t expect that soon). Kinder Morgan is trading around $40 with a 4.9% yield and a high probability forecast of 10% annual dividend growth for at least the next 5 years.
I am moving WMB from The Dividend Hunter buy/accumulate list to a Hold position. This is the type of outcome we like to get on one or two of The Dividend Hunter recommendations each year.