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  • irbbping irbbping Jun 28, 2011 4:41 PM Flag

    dumb question or what am I missing

    thanks for the detail on earnings, i am at the point where i am basically a value investor and use stock divs as part of my living expenses. i own ERF but wanted more exposure in the energy industry. Also have some utilities and MLP's, preferreds and commodities. i would like some exposure to gold and silver but have been waiting for silver to settle down. rogers sugar and atlantic power have been the best ones for me for div and capital gain since the 2008/9 crash.

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    • Well, I like energy stocks. I think that is where the quick money is. When I look at a stock, I first look at the P/E parameter and then the Divy. Having considered a number of energy stocks, I picked SDRL. SDRL has a high debt number, but it borrows money at under 7% and earns around 40% on this borrowed money. Nice math. They turn in a little under 40% Net Profit Margin, while big oil runs at around a 7 to 8% NPM. This seems to be the right field at the right time.

      I am somewhat familiar with the operations of the management, having held Frontline for a number of years. They treat their stockholders well.

      SDRL has only been listed on the NYSE for a little over a year, and as a result, there are old hands in the oil patch that do not know it exists. As it becomes better known, P/E should pick up. (And be sure to use future estimated earnings)

      Next consider the age of the fleet. RIG and DO average 25 years, whereas SDRL runs around 4 years old. The old players, RIG, NE and DO, can not live on reputation alone.

    • If you haven't looked into these two, I would suggest you investigate them:

      GABUX - Gabelli Utility Fund; Yields 12%, pays monthly Div.

      FT - Franklin Templeton Utility - pays 7.5% monthly.

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