Dear Mr. Berko:

Dear K.L.:

Today, everybody and their brothers, mothers, sisters and avatars are seeking high-yield investments. There’s lots of that stuff around, yielding between 7 and 70 percent – if you don’t mind investing in bonds issued by the fine countries of Somalia, Niger, Congo, Ethiopia and Greece.

The 18 percent Ethiopian oasis revenue bonds (to build 26 oases) could be highly rated by Moody’s, trade at $337 per $1,000 face value, mature in 2022 and have a 54 percent current return. The Niger turnpike bonds, backed by George Soros and the United Nations, have a 16.5 percent coupon that matures in March 2021, trade at $226 per $1,000 face value and have a current yield of 66 percent. And some of the Greek government’s 7.1 percent bonds were once rated BBB+ and mature in 33 days, trade at $102 per $1,000 face value and have a 70 percent current yield.

But I would be enormously more comfortable with Seadrill Ltd. (SDRL-$34.69), one of the world’s largest deepwater drillers, with $4.2 billion in revenues and a $3 dividend that yields 8.6 percent. SDRL has been in business since 2005 and has poked some good holes, producing some sizable offshore oil and gas discoveries in Africa, Brazil and Israel.

Seadrill has been a maverick company piloted by aggressive people who sit on a highly leveraged balance sheet. Management is placing big bets on a hugely growing demand for deepwater drilling. SDRL has grown from 10 rigs in 2005 to 48 rigs today and expects to own 52 rigs in 2013. The company’s deepwater fleet is second in size to Switzerland’s Transocean Ltd. (RIG-$49.39), a deepwater driller with $9 billion in revenues and a $3.16 dividend that yields 6.4 percent.

SDRL’s 9,800 employees are expected to grow 2012 revenues 9.8 percent to $4.6 billion and improve earnings by 16 percent to $3.29 a share, which might allow management to increase its dividend to $3.22. Though a debt-to-equity ratio of 140 percent gives SDRL shaky legs, a small drilling success could magnify its returns exponentially.

So with net profit margins of 46 percent, a couple of small successes could easily run the stock past Wall Street’s median target projections of $40 a share.

But I’m not as enamored of the shares as your broker. I think the $3 dividend is much too high. Considering that SDRL Chairman and President John Fredriksen owns 32 percent of the stock in his family trust, I understand why it’s up there.

I’m also uncomfortable with the company’s five-member board of directors. John’s daughter, Kathrine Fredriksen, serves even though her resume is as barren as Mother Hubbard’s cupboard. Three other board members are major cronies, each engaging in numerous related-party transactions with SDRL. Still, a 1,000-share purchase might be a great speculation.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com