After Restoring its Dividend, is Transocean LTD (RIG) a Buy? – Schlumberger Limited. (SLB), Halliburton Company (HAL)

The bottom line

Transocean exchanged hands around $52 per share at the time of the company’s dividend announcement.  At that price, an annual payout of $2.24 per share presents new investors with a compelling 4.3% yield.  While the resumed payout isn’t at the level Icahn had suggested, it’s still a dividend that trounces the yield on the S&P 500.

Peers Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL) are well-run companies with solid profitability, but both trade for richer valuations than Transocean.  To illustrate, Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL) trade for trailing price-to-earnings ratios of 18 and 14 times, respectively.  Transocean, meanwhile, trades for 13 times its adjusted 2012 earnings per share.

Furthermore, due to Transocean resuming its dividend payments, it now offers a yield significantly higher than its competitors. Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL) each yield less than 1.75%, while Transocean will provide investors a hefty yield of greater than 4% annually.  While investors should be confident in the prospects of all three companies going forward, you should prefer Transocean based on its significantly higher dividend yield and more attractive valuation profile.

The article After Restoring its Dividend, is This Oil Driller a Buy? originally appeared on Fool.com and is written by Robert Ciura.

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