Do You Need an Oil Stock for Your High Dividend Stock Portfolio?

SeaDrill (SDRL) caught my eye as a high dividend stock.  This deep water oil drilling company currently yields 7.54%.  It paid over $0.60 for the past three quarters.  However, it only has a three quarter dividend record.  Time will tell if this stock will be a reliable dividend payer.

Here is the description from Google Finance:

SeaDrill Limited is a Bermuda-based company active within the oil and gas industry. Its activities are of an offshore drilling contractor. The Company operates a fleet of 36 offshore drilling units, including eight units under construction, which consist of 10 jack-up rigs, 10 semi-submersible rigs, four drillships and 12 tender rigs. It operates three business segments. The Mobile Units business segment offers services including drilling, completion and maintenance of offshore wells. The Tender Rigs business segment operates self-erecting tender rigs and semi-submersible tender rigs. The Well Services business segment provides services using platform drilling, facility engineering, modular rig, well intervention and oilfield technologies. SeaDrill Limited operates through subsidiaries in Bermuda, Norway, Cayman Islands, British Virgin Islands, Cyprus, Nigeria, Liberia, Hungary, Singapore, Brazil, Hong Kong, Panama, the United Kingdom, Denmark, Malaysia, Brunei and the United States.

This stock’s price will correct when the price of oil corrects.  A continuation of the global recession, government debt crisis, and or a busting of China’s real estate and construction bubble will cause the price of oil to go down.  War with Iran (coupled with Iranian government sinking of oil tankers in the Straits of Hormuz), Keynesian money printing, large oil spills (Gulf of Mexico), and commercial banks resuming lending like in 2006 will all lead to higher oil prices.

The P/E is reasonable at 12.06.  Debt is less than 50% of assets.  I will analyze earnings and balance sheet in great detail in the future.

If you can’t wait for my analysis of their earnings power and strength of their balance sheet, then wait for this stock to pull back to below $20.00 per share like in May through July 2010.

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Be seeing you!

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Published in: on February 1, 2011 at 3:37 pm  Leave a Comment  

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