- For each S&P 500 industry sector, I will be taking a look at available companies to help determine the best stocks for income investors.
- In determining the best stocks per industry, I will be examining both the dividend growth and dividend yields of the stocks.
- Out of this group of Oil & Gas Drilling stocks, I feel that Ensco is the best long term option for income investors.
In this series of articles, I will be identifying which stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. For Part 17, I will be taking a look at Oil & Gas Drilling stocks. These stocks include:
- Diamond Offshore Drilling (NYSE:DO)
- Ensco (NYSE:ESV)
- Helmerich & Payne (NYSE:HP)
- Nabors Industries (NYSE:NBR)
- Noble (NYSE:NE)
- Rowan Companies (NYSE:RDC)
- Transocean (NYSE:RIG)
When ranking the dividend paying stocks by yield, the order is as follows:
- Transocean - 7.06%
- Ensco - 5.70%
- Noble - 4.77%
- Helmerich & Payne - 2.27%
- Rowan Companies - 1.29%
- Diamond Offshore Drilling - 0.98%
- Nabors Industries - 0.61%
When ranking them by dividend growth over the past five years, the order is as follows:
- Ensco - 2.90K%
- Helmerich & Payne - 1.15K%
- Noble - 298.30%
- Diamond Offshore Drilling - 0%
- Nabors Industries - 0%
- Rowan Companies - 0%
- Transocean - (5.06%)
Based on dividend growth, only Ensco, Helmerich & Payne, and Noble are suitable income investments for long term investors. Transocean currently has a high yield, but its dividend has actually decreased and from 2003 - 2010, the company didn't pay dividends, so I am not confident in its ability to maintain a long term high yielding dividend.
Out of the three suitable investments, Ensco has the highest yield and best dividend growth over the past five years. Looking at the chart below, you can see that Ensco has also seen the highest revenue growth over the past five years.
In terms of earnings, you can see that Helmerich & Payne is the only company out of the three that has seen positive growth over the past five years.
Based on trailing PE ratio, Ensco is the most attractively priced stock, while Helmerich & Payne is the least attractively priced.
Each of the companies have acceptable payout ratios all under 50%, with Helmerich & Payne having the lowest.
Out of the three suitable income investments, Ensco has the highest dividend yield and growth (over the past five years). It also has seen the highest revenue growth and has the most attractive PE ratio.
I believe because of these factors, along with the company's strong contracted revenue backlog of over $10 million and healthy balance sheet, Ensco is the best long term option for income investors out of this group of stocks.
As always, I suggest individual investors perform their own research before making any investment decisions.