This article originally appeared on RealMoney.com on Sept. 3, 2014 at 11:00 a.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.
Like many other large-cap offshore rig lessors, Ensco (ESV) had a difficult second quarter, at least in the market's eyes. When the company reported earnings at the end of July, the shares were trading above $51. Today, the shares sit just above $48.
On its previous earnings call, Ensco announced it had nine rigs in its fleet that required action. Five of those nine are now being marketed to sell, and the company took a writedown on the other four because projected cash flows were not commensurate with the stated value of the ships. This bad news was joined by management's belief that weakness in the jack-up and floater market will continue due to a slowdown in capital spending matched with an increase in supply coming onto the market.
However, the last quarter was not without good news. The company got a good dayrate on its latest floater deal. After the company's sale of five ships, it will have the second-youngest floater fleet among the major offshore rig lessors. Also, thanks to a drop in share price, Ensco now yields a very generous 6.1% and offers one of the best covered dividends in its industry.
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