Did the Market Get This One Right?

Despite slightly lower dayrates from ultra-deepwater floaters this past quarter, and flat EBTIDA expected in the first half of 2014, Seadrill (NYSE: SDRL  ) decided to increase its quarterly dividend by $0.03, pushing its current yield over 10%. Fourth-quarter earnings did not meet analyst estimates and, with flat cash flows and a heavily levered balance sheet, Seadrill shares solid off Tuesday. With only short-term softening in the offshore rig industry, did the market get this one right? 

Seadrill is a dividend aristocratic, but not the only one
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks, as a group, handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks, in particular, are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

This segment is from Tuesday's edition of "Digging for Value," in which sector analysts Joel South and Taylor Muckerman discuss energy and materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays and Thursdays. It can also be found on Twitter, along with our extended coverage of the energy and materials sectors @TMFEnergy.


Read/Post Comments (3) | Recommend This Article (1)

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  • Report this Comment On February 26, 2014, at 5:30 PM, Conkster wrote:

    Jeez, I need a deep water drill just to find anything useful in this article. No info on Seadrill, just an open question followed by a sales pitch. Seriously?

  • Report this Comment On February 26, 2014, at 5:40 PM, DukeMontrose wrote:

    SDRL makes it hard for us to love it. Pardon, to favor it as an investment. This week was a textbook example of the truth of above statement.

    It had two good news to give shareholders = an awesome deal to penetrate the promising Mexican market = keep a small fleet busy for many years on favorable terms AND record earnings.

    The market reaction? A sharp dive in the price of the stock.

    How did SDRL manage to achieve this extra ordinary feat?

    In stead of PAIRING the two good news, that is using the Mexican deal, worth some USD 2 Billion, as an introduction to the good earnings report. it released the Mexican news just days before the earnings report. Translation = it took the sails out of the earnings report. Poor timing.

    To make matters worse, the language of the original trans-script on the earnings conference was virtual gibberish.

    How a poor investor relationship exercise evaporated a billion or more in SDRL's market value.

    A raft of "explanations" surely will fallow = to set the record straight. But the damage was done.

    The kind of damage serious investors like large pools of capital abhor.

  • Report this Comment On February 27, 2014, at 6:33 PM, mewesley wrote:

    I suggest these guys actually do their homework on SDRL. EBITDA was not flat, it was up 14% quarter over quarter. Revenues were up double digits as well quarter over quarter. EBITDA is expected to increase 20% this year to roughly $3.5 billion. People like the dividend but this is also a growth story. They also announced a separate dividend plan where they keep 20% of all proceeds from MLP dropdowns and set them aside for special dividends to shareholders. Levered balance sheet no doubt, but at attractive interest rates that were lower due to using the rigs themselves as collateral.

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Related Tickers

10/23/2014 4:01 PM
RIG $30.47 Up +1.05 +3.57%
Transocean, Inc. CAPS Rating: ****
SDRL $24.14 Up +0.44 +1.86%
Seadrill CAPS Rating: ****

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