Dividend Cuts to Oil Companies?

[Jago]

I bought some ESV at a price that put me at just above 10% yield. Yes, I am aware that offshore drillers are probably some of the riskiest oil investments out there, but when the entire sector as a whole trades below 0,6 PB, I am inclined to take my chances with a driller that has 1) the least leverage compared to peers 2) has the best dividend coverage among peers 3) has the second newest fleet (after Seadrill).

With those things considered, if we see a 12+ month slump in oil prices, I expect ESV to eventually cut their dividend in half, but I can live with the resulting 5% YOC.

[hendi_alex]

I agree with you on ESV. Though right now I'm just using the shares as a trading vehicle. At some point I'll likely add some to the long term portfolio. My two choices in the sector are ESV because of the reasons that you cite, and SLB because IMO it is the best of the breed. I wouldn't mind having some of each in the long term portfolio. Right now I'm trying to get some additional shares of ESV, but am doing so via put sell. My $28 March puts brought in $1.60, for an effective entry of about $26.45 if assigned. If not assigned, I'll sell another batch of puts after expiration. IMO this is a great way to eventually pick up some discounted shares. If it takes two or three cycles to get assigned, the discount would be substantial.