Diamond Offshore Drilling Cuts Dividend
- July 22, 2010
- Dividend News, Dividend Stocks, High Yield Dividend Stocks
- Add a comment
Diamond Offshore Drilling (DO: 62.59 +0.41%) announced today that the company will cut their quarterly dividend by 45% due to lower revenues and future uncertainty on the drilling moratorium in the Gulf of Mexico.
Diamond Offshore pays a regular quarterly dividend of $.125 per share which it will continue to maintain. However, the company modified its dividend policy in 2007 to begin paying a special dividend each quarter as well. That special dividend is being cut from $1.38 per share last quarter to only $.75 per share this quarter.
Larry Dickerson, President and CEO, stated, “The decline in renewal contract dayrates from peak levels is continuing to impact our results.” Dickerson continued, “The reduction in the special dividend reflects the lower revenue stream and the continuing uncertainty surrounding a drilling moratorium in the Gulf of Mexico. We believe that given the current and anticipated industry conditions, it is increasingly prudent at this time to retain cash to maintain the Company’s financial strength and strategic flexibility, as well as to position us for potential rig acquisition opportunities. We believe that our special dividend policy is an important part of our efforts to enhance shareholder value.”
Based on the reduced special dividend level, DO shares now offer a 5.5% dividend yield which is a significant reduction from the 9.4% yield that investors expected.
The dividend cut from Diamond Offshore is in stark contrast to the recent dividend increases from competitor SeaDrill (SDRL: 39.07 +1.01%) this year. In February, SDRL increased their dividend by 10% to $.55 per share and in May hiked the dividend to $.60 per share.
DO shares were down 3.3% in early morning trading on the earnings and dividend news. Since the beginning of 2010, DO stock price has plunged 35%.
The dividend will be payable on September 1, 2010 to shareholders of record as of August 2, 2010.
At the time this article was published, the author held a financial position in SeaDrill Limited.
