Ensco (ESV): High scoring dividend growth stock
By Chloe Lutts Jensen, Chief Analyst, Cabot Dividend Investor
From Cabot Wealth Advisory 2/11/14 Sign up for Cabot Wealth Advisory—it's free!
One of the highest-scoring stocks on my dividend growth ranking is Ensco (ESV), a provider of offshore drilling services. Here’s what I wrote about ESV in the February issue of Cabot Dividend Investor:
“Ensco is the second-largest provider of offshore drilling services to the petroleum industry, and has one of the largest and newest fleets of offshore drilling rigs available for contract. The company has aggressively pursued growth over the past five years, enlarging its fleet, expanding its international presence from 17 to 22 countries and completing the largest acquisition in its history.
“At the same time, Ensco has become much more shareholder friendly, increasing its dividend from $0.10 a year (where it had been for over a decade) to $1.40 in 2010.
The massive increase in the dividend in 2010 was followed by three more boosts in 2012 and 2013, to the current level of $3.00 per year.
“Ensco’s cash flow growth, while sometimes uneven, has been more than strong enough to support these increases. The current payout ratio is 33%. For its strong recent dividend growth and excellent potential for further increases, Ensco earns a Dividend Growth Rating of 10 and a Dividend Safety Rating of 8.06.
“The new dividend rate and 5.25% current yield will likely attract more investors going forward. Dividend growth-focused investors with some appetite for volatility can buy Ensco right here. Ensco will report earnings before the market opens on February 20.”
For continuing guidance on Ensco, and more of the best dividend growth stocks in the market, consider trying our newest publication, Cabot Dividend Investor. The first issue was just released two weeks ago, so we have tons of great buy ideas of income investors of every stripe. Click here.
By J. Royden Ward, Chief Analyst of Cabot Benjamin Graham Value Investor
From Cabot Wealth Advisory 1/2/14 Sign up for free Cabot Wealth Advisory
Ensco plc (ESV) is a leading offshore oil and natural gas drilling company. Ensco owns and operates shallow water and ultra-deepwater rigs located in many parts of the world. Two new drilling rigs are ready to begin multi-year contracts with major international oil companies. Six more rigs are under construction. In addition, Ensco is spending heavily on standardizing and modernizing its drilling fleet which will help the company maintain its advantage over competitors.
Demand for Ensco's drilling rigs is solid and will likely strengthen further during the next several years. Sales will rise 15% in 2014, and EPS will climb 17% to 7.20.
Ensco has been named #1 in total customer satisfaction for the third consecutive year. Its stock’s low current P/E (price to 2013 earnings) ratio of 9.2 and high dividend yield of 5.3% are very attractive. ESV shares are currently selling right at book value.
I expect ESV to reach my Minimum Sell Price of 88.49 within one year.
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From Cabot Wealth Advisor 9/13/12 Sign up for free Cabot Wealth Advisory e-newsletter Today, I want to bring an oil stock to your attention; it has excellent fundamentals and a very intriguing chart.
The company is Ensco (ESV), a huge British firm that owns the second-largest oil drilling fleet in the world. Its rigs run the gamut from shallow-water to ultra-deepwater drilling, but it’s the latter that is really making a splash—that’s where most of the firm’s whopping $10 billion backlog comes from! Ensco’s acquisition of Pride International has boosted growth, and analysts see the bottom line leaping 61% this year (to $5.35 per share) and another 31% in 2013 ($7 per share) as higher-priced contracts kick in. Shares also pay a solid dividend (37.5 cents per share, per quarter for a 2.5% annual yield).
The stock itself had a decent comeback in the 2009-2011 period but, like many drillers, effectively topped out in April 2011 around 60. It fell hard during last year’s baby bear market, bottoming at 37, then rallied back to 60 earlier this year ... but then it suffered another pullback, this time to 42! But now it’s rebounded again and tightened up just south of 60.
The upshot of all this is that ESV has etched a 16-plus-month base, has great growth numbers, a more-than-reasonable valuation (12 times trailing earnings) and its sector is finally kicking into gear. I think a clear breakout above 60 on huge volume could be bought, as such a move would likely kick-off a longer-term move.
Now, just FYI, if the price of oil collapses in the weeks ahead, all bets are off—commodity stocks can be tricky that way. But the set-up is there, the earnings growth and dividend are pretty much baked into the cake, and the stock’s liquidity (it trades nearly $200 million of volume per day) should make it a favorite of institutional investors.For more information, click here.
Ensco plc (ESV)
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1/2/14 Ensco plc (ESV): Strong demand for its rigs
9/13/12 Ensco (ESV): Excellent fundamentals and intriguing chart