Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Dividends in the Deepwater

Unless you're an avid reader of Scandinavian Oil-Gas Magazine, you probably missed the latest deepwater dish: Seadrill has entered into a sale/leaseback transaction with dynamic dividend payer Ship Finance International (NYSE: SFL  ) on one of the driller's newly built rigs. Seadrill will receive $850 million up front, and immediately enter a 15-year lease on the same drillship.

Unlike Noble's (NYSE: NE  ) Brazilian bonanza, the importance of this deal is not glaringly obvious. But whether or not other deepwater players follow suit, this is a major turning point for Seadrill, the fourth-largest offshore driller by market cap.

In addition to being the man behind Seadrill and Ship Finance, billionaire John Fredriksen is also responsible for turning Frontline (NYSE: FRO  ) into the world's leading tanker company. Frontline's past is illustrative of Seadrill's future. After years of aggressively consolidating assets, Frontline began returning capital in a major way via refinancing and dividends. Sale/leasebacks, a fairly common real estate tool, were one key method of freeing up cash. Shareholder returns, with dividends reinvested, have been dazzling.

Granted, Seadrill isn't the first driller to execute one of these transactions -- Pride International (NYSE: PDE  ) and Diamond Offshore (NYSE: DO  ) have cut similar deals in the past. Based on Seadrill's recent analyst presentations, however, this looks like a much more systematic application.

Unlike Transocean's (NYSE: RIG  ) special post-merger dividend, Seadrill's approach has the merit of creating an ongoing cash-distribution vehicle. It doesn't take too much deep thought to see the appeal.

Related Foolishness:

If dividends are your aim, Income Investor plays that game. Every month, we recommend two high-yielding investments to subscribers. Survey all past picks with a 30-day free trial.

Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 649637, ~/Articles/ArticleHandler.aspx, 10/23/2016 4:24:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
SFL $14.02 Down -0.24 -1.68%
Ship Finance Inter… CAPS Rating: **
DO $17.40 Down -0.50 -2.79%
Diamond Offshore D… CAPS Rating: **
FRO $7.71 Down -0.15 -1.91%
Frontline CAPS Rating: **
NE $5.97 Down -0.04 -0.67%
Noble CAPS Rating: ****
PDE.DL $0.00 Down +0.00 +0.00%
Pride Internationa… CAPS Rating: ****
RIG $10.50 Down -0.09 -0.85%
Transocean CAPS Rating: ****