Anyone who knows anything about dividend stocks knows that an 8.4% yield has to have a catch. Seadrill (NYSE: SDRL) is no exception. By most measures the big dividend is secure, but if you plan on buying into this one, you better know what you’re getting into.
Its current yield of 8.4% is more than twice that of its nearest competitors, Ensco (NYSE: ESV), Noble Energy (NYSE: NBL) and Transocean (NYSE: RIG). Plus, its management team has more deals running at one time than most bookies. But, that is not to say it doesn’t know what it’s doing.
Here’s what Seadrill reported in just the first quarter…
- It had its best operating results ever with an EBITDA of $713 million.
- It beat first quarter earnings and revenue estimates by 35%.
- It increased the dividend, again, by $0.03.
- It increased the company’s rig utilization rate from 86% to 92%.
The one thing that keeps most analysts away from this stock, which may be a good thing, is that the company has so many buy and sell programs for drilling rigs that most analysts can’t understand the stock.
Just recently Seadrill had something in the area of $4 billion flying around in new and used rig deals.
All this activity is geared toward constantly improving the company’s fleet of drilling rigs to deliver the newest and best technology to an industry that, since the Gulf oil disaster, has to have safer operations. It may be confusing, but it will result in the newest and most advanced fleet of rigs in the business.
Also, 60% of the worldwide drilling fleet is approaching 25 years of age, and Seadrill is positioning itself to be the leader in new, safe and leading edge technology. It currently has 19 new rigs under construction with delivery expected between now and 2015.
Ensco, Noble and Transocean offer reasonable growth and dividends, but the ultimate aggressive growth and income idea may be Seadrill. If you can put up with a volatile ride, the 8%-plus dividend is there for the taking. Just go in with your eyes wide open.
Google for the Long Run
A recent Barron’s article stated that Facebook (Nasdaq: FB) will not eat Google’s (Nasdaq: GOOG) lunch. In fact, long term, Google just might win the social-media race. And, as we already know, Google’s stock is leaving its competitors in the dust, topping $900 this year.
Barron’s thinks that despite its recent brush with $920 per share, the search giant should be in most portfolios. And I agree… but only on pullbacks. It currently sits at about 20% above its 200-day moving average. It is not what I consider a screaming buy at these prices.
But there are solid long-term reasons to own it.
Google’s future growth lies in in the fact that despite its huge numbers, only 20% of global advertising spending is done on the Internet, versus 41% on television. This is where Google could get a very big leg up in future revenue gains.
Local advertising alone hit $133 billion last year and only 16% of that is online – another untapped resource.
Analysts think Google’s earnings could run from last year’s $39.88 to $53.39 in 2014. New ventures in peer-to-peer lending and a statistical model that targets businesses being shunned by banks are being viewed as bold new efforts to deploy the company’s cash with good potential.
All the stars are aligned for Google. It has for a very bright long-term picture, but my concern is buying anything at record highs. This is one you want to own and definitely need to have on your bogie board. But, look for pullbacks approaching the 200-day moving average for buying opportunities. Build your position on weakness and dips.
The “Slap in the Face” Award: Hide This Guy’s Checkbook
This one is a smack for the record books, but not a good record.
There’s a fashion designer who has a cat, but not just any cat. This cat has three maids and flies on a private jet. Crazy, right?
Hold on to your hats. This guy wants to marry his cat. His name is Karl Lagerfeld and he is dead serious.
The three maids are there to take down everything the cat does while Karl is away, and he reads it to keep up on his, umm, cat to be. I don’t know what else to call it.
When asked about the need for maids and a private jet for a cat, he said, “Why not?” His only concern is that the cat will become more famous than he is.
Oh, Karl also has a person whose only job is to follow him around with a Pepsi Max on a sliver tray. Thirsty and looney!
Someone should take this guy’s checkbook away from him.
Powered by Facebook Comments