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Cramer on Core Labs

All week Mad Money is celebrating the power and the glory of dividends and the companies that increase them. So Cramer is laying out the stocks that could be the next Hasbros based on dividend boosts ahead of their earnings’ reports.

Tuesday's pick is the energy stock Core Labs, a little oil service company that reports its fourth quarter on Thursday morning. This stock is in step with oil futures. Cramer told viewers that if the oil futures are diving that morning, this stock might not pop. However, Core Labs' big percentage dividend hike in January makes him bullish about the company’s long-term prospects.

Core actually has a small yield of just 0.3 percent. But remember, the Mad Money host said, in this series we are looking for companies that are signaling strength by boosting their dividends above and beyond the pale as well as most other stocks.

Last month CLB gave its base dividend a 20 percent hike from 10 cents a quarter to 12 cents. This, Cramer thinks that is virtually a neo sign that reads, “I’m Core Labs, none better.”

Core is the thinking man’s oil service stock, Cramer said. The company gets 70 percent of its sales from international business and it’s roughly 80 percent weighted toward crude oil related work. Plus, it has plenty of room to grow in both North American and natural gas. And the company’s fortunes are tied to be both international and domestic drilling.

The largest business for CLB is called reservoir description. This means they analyze rock, oil, gas and water in oil or gas reservoirs to better assist oil and gas companies in calculating their reserves and determining the best way to recover them. Core does this in West Africa, Brazil, Middle East and Asian-Pacific and in deepwater regions as well.

In North America Core Labs has its production enhancement division, which is a play on domestic drilling. The company is in shale plays that the Mad Money host talks about all the time, including the unconventional ones like Barnett, Fayetteville, Haynesville, the Marcellus and more wells that get drilled in these regions.

Also, CLB has a history of paying out special dividends, when you factor them all into the equation, the company yielded over 1 percent in both 2008 and 2009. Even though these aren’t that big, Cramer said, these are terrific payouts for a high growth company like Core.

The company is expected to earn $5.34 a share this year and $6.34 a share in 2011, with a cash flow per share of $6.62 this year and $7.92 in 2011. Core is also sitting on $5.90 a share in cash, which is huge for a company with a share price of $120. This is still enough to pay its regular annual dividend a dozen times over.

Cramer thinks we could hear more good things from Core Labs when it reports on Thursday, but stressed that you should not chase this stock ahead of the quarter. Even if it turns out to be the next Hasbro, the Mad Money host said, you won’t see any of that upside if you’ve already bid up its share price to unreasonably high levels.

The bottom line: “A company that can raise its dividend by 20 percent like Core Labs,” Cramer said, “is a company that’s telling you things are getting better.”

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