Transocean’s “debt securities have been the worst performers in the $4 trillion Bloomberg US Corporate Bond index this quarter as default swaps indicate the biggest deterioration in creditworthiness among peers. Barclays Plc cut its 2015 cash flow forecast for Transocean by 22 percent this month to $2.5 billion, saying the “have-it-all” strategy is unsustainable,” Bloomberg reported last month.
With last Friday’s 4.5% drop to the levels that are well below where it traded in the aftermath of the 2010 Gulf of Mexico oil spill, Transocean now sports a dividend yield of 9.5%. The stock is 4.1% of OIH’s weight and 3% of IEZ’s weight.
However, a case can be made that markets are unjustly punishing the oil services ETFs on dividend reduction speculation while ignoring the recent dividend growth of the ETFs’ largest holdings. [Oil Services ETFs See Growing Dividends]
Schlumberger (NYSE: SLB), the world’s largest oil services provider, has nearly doubled its payout since 2011. Halliburton (NYSE: HAL), Schlumberger’s primary rival, has boosted its dividend by two-thirds since 2012. National Oilwell Varco (NYSE: NOV), a wide moat stock and a holding at Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A), has roughly quadrupled its payout in just the past year. Those three stocks combine for nearly 42% of OIH’s weight and almost 40% of IEZ.
Market Vectors Oil Service ETF
