Halliburton (HAL -0.04%) is starting 2023 off with a bang. The oil-field services giant is increasing its dividend by 33% to $0.16 per share each quarter. That will push its dividend yield to 1.6%, right around the S&P 500's level. It's the company's second big dividend boost in as many years. 

Given the improving conditions in the oil market, Halliburton could continue to return more cash to its shareholders in the future. That sets it up to potentially produce attractive total returns.

Hitting an inflection point

Halliburton had a big year in 2022. Higher oil and gas prices gave producers the confidence to increase their capital spending. That drove demand for the company's equipment and services. Halliburton's revenue rose 33% for the year to $20.3 billion. Meanwhile, operating income rocketed 50% to $2.7 billion. 

That enabled the oil-field services giant to produce growing free cash flow. It used some of that money to strengthen its balance sheet (net debt fell by about $500 million) and return additional capital to shareholders through a higher dividend and the resumption of its share repurchase program.

Halliburton's 33% dividend increase this year is its second sizable boost since the company slashed its dividend by 75% in 2020 due to the pandemic-driven slump in oil prices (it reset its dividend early last year, increasing it by 166.7%). The pandemic-driven reduction allowed the company to retain more cash to fund capital expenditures and shore up its balance sheet during the downturn. However, with oil market conditions on the upswing, Halliburton has more free cash to return to shareholders. 

Optimism about what lies ahead

Halliburton expects the good times in the oil market to continue. CEO Jeff Miller commented in the earnings press release, "Halliburton's execution in 2022 demonstrated the earnings power of our strategy, and I expect this earnings power to strengthen in 2023 and beyond." Miller continued, "I am confident in Halliburton's strong outlook and ability to generate increased returns for shareholders. Halliburton's exceptional financial performance is a clear result of executing our strategic priorities -- to maximize value in North America, deliver profitable international growth and drive capital efficiency." That positive outlook gave the company the confidence to boost its dividend and restart its share repurchase program.

Halliburton's view mirrors that of oil-field services leader SLB (SLB 0.19%). Its CEO, Olivier Le Peuch, stated in its earnings release, "The fourth quarter affirmed a distinctive new phase in the upcycle." He noted that activities improved across several operating areas. As a result, he says, "These activity dynamics, improved pricing, and our commercial success -- particularly in the Middle East, offshore, and North American markets -- combine to set a very strong foundation for outperformance in 2023. Looking ahead, we believe the macro backdrop and market fundamentals that underpin a strong multiyear upcycle for energy remain very compelling in oil and gas and in low-carbon energy resources."

That view also gave SLB the confidence to provide its investors with its second sizable dividend increase in the past year. With strong growth expected to continue in 2023 and beyond, SLB and Halliburton could continue to push their dividend payments higher while also buying back more stock. Those growing cash returns could help the oil-field services giants to continue producing strong total returns. Halliburton has delivered a nearly 80% total return since the start of last year, while SLB's total return is approaching 90%.

The future looks bright for oil-field services

Oil companies underinvested in new supply in recent years due to lower prices and uncertainty about long-term demand. Supplies are now tight because of that, which is pushing prices higher. They'll likely remain relatively elevated in the coming years while the industry invests in new supplies, which should be a boon for oil-field service companies like Halliburton. It should enable the company to continue growing its cash flow and cash returns to shareholders, putting it in an excellent position to produce strong total returns. That makes it a compelling option for investors seeking a way to capitalize on the strong conditions in the oil market while collecting an attractive and growing dividend.