Seadrill Partners Jumps In Trading Debut

First, I was surprised that Seadrill Partners (SDLP) IPO was priced at $22 (high end of the range) and now it jumped to $24.66 on the first day of trading. It is now offering a yield of 6.3%.

I don’t understand what investors see in this stock, but they are starving for income yielding securities.  

Disclosure: I do not own SDLP.

2 thoughts on “Seadrill Partners Jumps In Trading Debut

  1. Do you see something fundamentally wrong with the stock? My assumption is that commodities (esp. Oil) will keep rising. I’d like to take the $0.3875 quarterly dividend (around 6.5% now) and not worry about appreciation if there’s no obvious flaws.

    • Just what I mentioned in my article.

      – There is limited growth over the next 3-4 years.
      – There is no guarantee that they will be able to sign the next contract after the initial contract expires.
      – There is no guarantee rates will not go down on the next contract.
      – Although all rigs are very new, there will be a time when the rigs will need to be replaced.

      The dividend will be safe for a while though because common shares have priority over subordinated shares. For me, the risk was not worth the dividend. However, the stock did go up and I’m sure there are tax considerations with these MLPs as well.

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