Oil And Gas Dividends For The Fixed-Income Investor

Includes: OKE, RIG, SLB
by: Matt Schilling

Oil producing companies have been one of the key sectors in the growth of the American economy. That being said, Oil & Gas dividends have been some of most consistent payouts over the last 100 years. This article will focus on three Oil & Gas companies paying both very nice and very conservative dividends.

Oneok Partners (OKS) - Founded in 1993, and based in Tulsa, Oklahoma, Oneok Partners currently yields 4.4% and trades at a P/E ratio of 16.62. OKS focuses its business on the gathering, processing and storage of Natural Gas here in the US.

Not only is OKS very inexpensive based on its current P/E, they've recently increased their quarterly distribution to $0.635/share. One thing investors should also consider is the fact OKS plans to spend $340 - $360 million on a brand new natural gas infrastructure located in the Cana-Woodford shale region of Oklahoma. Investors should like the stock at these levels, however one eye should be focused on the spot price of natural gas as it will directly effect the bottom line of OKS.

Schlumberger (NYSE:SLB) - Founded in 1926, and based in Houston, Texas, Schlumberger is one the leading suppliers of technology and information solutions for the oil and gas exploration industry. SLB currently yields 1.5% and trades at a P/E ratio of 19.53, making both very affordable and a conservative dividend play within the energy sector.

Investors should be pleased to know that earnings for the first quarter rose 38%, which was due in part to the record number of US-based rigs drilling for oil. Schlumberger's deep water and seismic businesses continued to show positive growth. One of the laggards for SLB were its international units, which steadied for the first time since 2009. SLB remains one the best performing companies in the sector, and a stock I'd recommend for anyone looking to build their fixed income portfolio.

Transocean Limited (NYSE:RIG) - Founded in 1953, and based in Zug, Switzerland, Transocean currently yields 6.3%. Currently trading near the lower end of its 52-week range RIG provides offshore contract based drilling services for oil and gas wells located all around the world.

The 6.3% yield makes RIG very attractive, even though a string of bad news regarding liabilities in Brazil has hit the stock pretty hard. When we examine Transocean a bit closer we need to consider that shareholders may see a positive pop in the stock. This would be due to the positive restatement of earnings, due primarily in part to the upward trends seen within the day-rates of the rig market. These day-rates are a key catalyst for RIG anytime they report earnings, depending on the price of the rates the earnings can be restated either positively or negatively. If investors are going take a position in RIG, they'll need to consider that earnings have a very good chance of being restated, and that growth at first sight may not necessarily be as glamorous as it seems.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.