August 16, 2012 | In: Energy

Does Transocean (NYSE: RIG) Pay a Dividend?

My friend was contemplating buying some RIG shares for the long term, so he asked me whether Transocean pays dividends or not. I didn’t know what to answer, see, the short answer is Transocean doesn’t pay dividends.

However, that answer can be modified to Transocean doesn’t pay dividends at the moment – the thing is Transocean was supposed to pay dividends back in May of this year, but it didn’t. It did pay dividends from May 2011 until February of 2012 (every quarter -as scheduled) though. The yearly dividend, on average, was about 1.5%.

Transocean used to pay dividends regularly from 1993 until 2002 – but these dividends were negligible (they were about 0.2%/year).

I have no idea whether that dividend skip back in May was a glitch in their accounting system, or whether it’s a decision to no longer pay dividends. I personally think that Transocean should not pay any dividends at the moment, simply because they’re losing money at the moment, and there are still many restrictions on off-shore drilling.

But will RIG have dividends in the future?

I think it will. You see, Transcoean (unlike many other US listed companies) has a successful business model and it will not fail. The thing is they’re still feeling the pain from what happened a couple of years ago in the Gulf of Mexico.

But, one can argue that they were doing fine for nearly a decade and they haven’t paid a dime in dividends. That is correct, but the fact that they started paying somehow decent dividends (1.5%) for the past year means that they now have someone in upper management thinking that dividends is a good idea to lure investors. I’m not sure if Transocean will pay dividends forever, but I think they will start doing this the moment they become profitable and for at least a few years.

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