Updated 3/6/25

Cactus, Inc. (NYSE: WHD) operates in the oilfield services sector, specializing in wellhead and pressure control equipment. While this industry can be highly cyclical, Cactus has carved out a strong reputation for efficiency and innovation. The company’s financial strength and steady cash flow make it an interesting choice for investors who focus on dividends.

While it doesn’t offer an eye-popping yield, Cactus has been quietly growing its payouts while keeping its balance sheet in great shape. For those looking beyond just high dividend yields and into the sustainability of payouts, there’s a lot to like. Let’s break down the key aspects of WHD from a dividend investor’s perspective.

Key Dividend Metrics

💰 Dividend Yield: 1.11%
📈 5-Year Average Dividend Yield: 1.05%
🔄 Dividend Growth Rate: Steadily increasing
🛡️ Payout Ratio: 18.05% (well within a sustainable range)
📅 Ex-Dividend Date: March 3, 2025
💵 Next Dividend Payment Date: March 20, 2025

Dividend Overview

Cactus isn’t the kind of stock you buy for a big dividend payout, but its yield of 1.11% is still worth noting. More importantly, the company has demonstrated a commitment to growing its dividend, which matters more for long-term investors. A low payout ratio of just 18.05% means Cactus has plenty of room to increase its dividends in the future without stretching its finances.

The company’s dividend consistency is a positive sign. Even in an industry prone to ups and downs, Cactus has maintained a responsible approach to capital returns. For those who prefer companies that won’t put dividends at risk during downturns, this approach makes WHD more attractive.

Dividend Growth and Safety

A stock with a low yield isn’t necessarily a bad choice if the company has the ability to grow its dividend over time. Cactus has strong cash flow and a capital-light business model, which allows it to return money to shareholders without sacrificing growth.

• The company’s levered free cash flow of $228.18 million is more than enough to cover dividends and reinvest in its operations.
• A debt-to-equity ratio of 3.30% shows that Cactus has very little debt, reducing financial risk.
• With an operating margin of 25.89%, the business is running efficiently, which helps sustain dividend payouts even in weaker market conditions.

Taken together, these factors indicate that Cactus is in a strong position to continue growing its dividend over time.

Chart Analysis

Overall Trend

The price action in Cactus, Inc. (WHD) shows a strong uptrend for most of last year, with the stock making higher highs and higher lows. However, in recent months, momentum has shifted downward, with a clear breakdown below key moving averages. The stock peaked near $70 and has since pulled back sharply, now trading below both the 50-day and 200-day moving averages. This shift suggests a transition from a bullish phase to a corrective or potentially bearish phase.

Moving Averages

The 50-day moving average (orange line) had been acting as a key support level throughout much of the rally. However, in early 2025, the price started trading below it, signaling weakening momentum. More concerning is the fact that the 50-day has now crossed below the 200-day moving average (blue line), forming what is commonly known as a death cross—a technical signal that often points to further downside risk.

The 200-day moving average had previously provided strong support, but once the stock broke below it, the decline accelerated. The price is now well below both moving averages, confirming that sellers are in control.

Volume and Selling Pressure

Volume has picked up significantly during the most recent decline, indicating strong selling pressure. This suggests that investors may be reducing exposure to WHD, possibly due to fundamental concerns or broader market conditions. There are no major volume spikes signaling capitulation yet, which means there could still be more downside before a bottom is established.

Relative Strength Index (RSI)

The RSI is currently sitting around 47, which is in the neutral zone. This means the stock isn’t quite oversold yet, but it has lost the strong buying momentum it once had. The RSI had been trending lower for several months, which aligns with the stock’s broader weakness. If the RSI drops below 30, it could indicate that the stock is in oversold territory, which might attract some bargain hunters.

Recent Price Action

The last five candles paint a picture of continued weakness. The stock attempted to hold above $50 but failed, closing lower at $46.88. The wicks on the recent candles suggest that buyers are stepping in at lower levels, but they are not strong enough to push the price back up in any meaningful way. Without a strong reversal pattern, the stock could continue drifting lower toward previous support levels.

Analyst Ratings

Recent Upgrades and Downgrades

Over the past six months, Cactus, Inc. (WHD) has experienced a mix of analyst upgrades and downgrades, reflecting varying perspectives on the company’s performance and outlook.

Upgrades:

• October 17, 2024: Barclays upgraded WHD from “Equal-Weight” to “Overweight,” raising the price target from $48 to $60. This upgrade was attributed to improved operational efficiencies and a favorable market environment for oilfield services.

Downgrades:

• October 16, 2024: BofA Securities downgraded WHD from “Neutral” to “Underperform,” adjusting the price target from $46 to $47. The downgrade was due to concerns over potential market volatility and its impact on the company’s earnings stability.
• November 4, 2024: Barclays downgraded WHD from “Overweight” to “Equal-Weight,” maintaining a price target of $61. The decision was influenced by emerging challenges in the oilfield services sector, prompting a more cautious outlook.

Consensus Price Target

As of the latest analyses, the consensus 12-month price target for WHD stands at $56.40. This reflects a balanced view among analysts, considering both the company’s strengths and the potential risks in its operating environment.

These mixed ratings underscore the dynamic nature of the industry and the importance of monitoring both company-specific developments and broader market trends when evaluating investment opportunities.

Earnings Report Summary

Cactus, Inc. wrapped up the third quarter of 2024 with solid financial results, showing resilience in a challenging oilfield services market. Revenue came in at $293.2 million, up slightly from the previous quarter’s $290.4 million. While not a massive jump, it signals steady performance despite some industry headwinds.

Operating income was reported at $76.8 million, with an operating margin of 26.2%. That’s a bit lower than the 27.5% seen in the prior quarter, but still reflects efficient cost management. Net income came in at $62.4 million, maintaining a strong net income margin of 21.3%.

Earnings per share on an adjusted basis landed at $0.79, exceeding analyst expectations. Adjusted EBITDA hit $100.4 million, with a margin of 34.2%. While slightly lower than the previous quarter’s 35.7%, these numbers show the company remains on solid financial footing.

One of the standout positives from this report was the significant increase in cash flow. The company generated $85.3 million in operating cash flow, boosting total cash and equivalents to $303.4 million. What makes this even more impressive is that Cactus remains completely debt-free, giving it a strong financial cushion heading into the next quarter.

On the dividend front, the company rewarded shareholders with a quarterly payout of $0.13 per share in October. While the yield isn’t the highest in the sector, the fact that Cactus continues to return capital to investors is a sign of confidence in its financial strength.

CEO Scott Bender highlighted the strong performance of the Spoolable Technologies segment, which helped drive results above expectations. He credited the team’s execution and strategic decisions for keeping the company on track.

Looking ahead, the company expects revenue to decline slightly in the fourth quarter, likely due to broader industry trends. Despite this, Cactus anticipates keeping its adjusted EBITDA margins strong, with forecasts ranging between 33% and 35% for the Pressure Control segment and 36% to 38% for Spoolable Technologies.

Overall, this quarter’s performance demonstrates Cactus’ ability to generate steady earnings, maintain a solid cash position, and navigate an unpredictable industry. With a debt-free balance sheet and continued focus on shareholder returns, the company remains well-positioned for whatever comes next.

Financial Health and Stability

Cactus stands out for its financial discipline, which is especially important in the unpredictable energy sector. The company maintains a strong balance sheet, solid profitability, and a comfortable cash position.

• A return on equity (ROE) of 19.99% shows that management is using capital effectively.
• The current ratio of 4.33 means the company has ample liquidity to cover short-term liabilities.
• With total cash of $342.84 million and very little debt, financial flexibility remains a key advantage.

These numbers reinforce why Cactus is a well-positioned company, even in an industry where volatility is common. This stability makes its dividend much safer than many of its peers in the energy services sector.

Valuation and Stock Performance

Cactus isn’t trading at a bargain-basement price, but its valuation is reasonable considering its earnings and cash flow.

• The stock’s price-to-earnings (P/E) ratio of 16.92 suggests it is fairly valued compared to historical levels.
• An enterprise value-to-EBITDA multiple of 7.99 is within a healthy range for an oilfield services company.
• The price-to-book ratio of 2.98 indicates a fair valuation relative to its assets.

Stock performance has been bumpy, with shares currently trading around $46.88—down from a 52-week high of $70.01. The company’s beta of 2.06 signals that it is more volatile than the broader market, which is something to consider for investors looking for stable income.

Risks and Considerations

No investment is without risk, and WHD has a few things to watch for—especially for dividend-focused investors.

⛽ The energy sector is highly cyclical, and demand for Cactus’ products is tied to oil prices and drilling activity. If the industry slows down, revenue could take a hit.

📉 Revenue has declined by 1% year over year, and quarterly earnings dropped 4.6%. While not drastic, it’s a trend that should be monitored.

📊 The dividend yield is on the lower side, which may not be appealing to those looking for immediate income.

Despite these risks, Cactus has built a strong enough financial position to weather downturns better than many of its competitors.

Final Thoughts

Cactus, Inc. might not be the first stock that comes to mind for dividend investors, but it has a lot of qualities that make it an appealing long-term play. The company’s financial discipline, low payout ratio, and steady dividend growth provide a compelling case for those looking for a balance between stability and future income potential.

For investors who prioritize high current yields, WHD might not be the best option. However, for those looking at sustainable dividend growth and financial strength, Cactus could be a worthwhile addition to a diversified income portfolio. The company’s recent stock price drop also makes it more attractive compared to its historical valuation levels.

While energy-sector investments always come with some risk, Cactus has positioned itself well to continue rewarding shareholders over the long run.