Since its $7 billion purchase of Pride Drilling back in 2011, Ensco (ESV) has quickly become a leader in the deep and ultra-deepwater drilling space. The company owns 70 rigs and currently receives more than half of its revenue from deep-water drilling.
That’s important considering just how expensive deepwater drilling can be; ultra-modern rigs can go for upwards of $600,000 a day to rent. Those high day rates and longer rolling contracts have translated into robust cash flows and made Ensco a dividend machine.
Three years ago, ESV was paying a mere 10 cents annually and yielded just 0.25%. Ensco’s management announced during its earnings call that they are increasing the stock’s quarterly dividend by 33% to 50 cents per share, or $2 annually, pushing ESV’s yield up to 3.3%.
Perhaps more importantly, Ensco’s payout ratio is a low 38%. That means there’s still plenty of cash left to fund operations as well as increase that dividend further.