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It has been awhile since I profiled one of the more unique holdings in my income portfolio, oil services firm Seadrill (NYSE:SDRL). Oil services is not a sector known for its dividends, but Seadrill is a significant exception. The stock is up just $2 a share since I profiled it in November but it continues to also provide an ~8% yield. The company has had some positive catalysts recently and I believe the shares are headed to $45. For yield investors it offers the best of both worlds, a good income stream with capital appreciation potential to boot.

Recent positives for Seadrill:

  • It delivered an earnings report today that showed EPS of 85 cents, 21 cents above the consensus estimate.
  • Revenues also rose ~20% to $1.26B, handily beating expectations of $1.14B.
  • Operating profit for jack-up rigs was $145M vs. $67M a year ago
  • It also announced a 3.5% quarterly dividend hike to 88 cents a share.
  • The company was the subject of a Buy idea at the Ira Sohn Investment conference recently.

4 additional reasons SDRL is a solid income pick up at under $41 a share:

  1. The shares now yield 8.4%. The company has raised its regular quarterly payout just under 50% over the last three years.
  2. Given the yield, paying just over 11x 2014's projected earnings seems very cheap.
  3. After expected growth of over 8% for revenues this year, sales are projected to increase ~20% as new rigs come online. The stock sports a minuscule five year projected PEG (.43).
  4. The 14 analysts that cover the shares have a $46 a share on SDRL. HSBC Securities upgraded the shares from "Neutral" to "Overweight" in March.
Source: Seadrill: 8% Yielder Still Has Upside