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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (10596)	12/17/2011 11:29:34 AM
From: Bocor	Read Replies (1) \| Respond to of 34328

There is still much unknown about exactly which of SeaDrill’s assets are going to be transferred to Seabras so there could still be much changing but based on history, here's how this deal could play out. It seems to allow SeaDrill to collect the majority of the dividends paid by Seabras. Historically, SeaDrill has paid out most of their operating cash flow to investors in the form of dividends. It is quite likely that Seabras would do the same. Thus, by SDRL keeping the majority of the shares, SeaDrill will increase their financial flexibility but still receive most of the cash flow from their Brazilian operations. Likely that SeaDrill is doing this is to insulate the company from any potential liability that could arise from a situation like a big spill or something like that. I like Brazil as a growth story, although there ARE risks in any emerging market. I don't expect the new Brazilian subsidiary to be a true spin-off; it will almost certainly be an ECO, { Equity Carve-Out,} findarticles.com and any dividends paid to SDRL are simple accounting changes to SDRL's cost basis in the new entity. No cash is exchanged between them, and the dividends will not contribute to SDRL's EPS. However, they will retain xx% of the new sub's earnings. Finally, I'm not sure what kind of yield the new sub will have....they should be pretty constant given the long term contracts of the rigs.