This Oil Stock Yields 10.5%... But I Doubt You've Ever Heard Of It

They're some of the most reliable dividend-paying stocks on earth.

Each controls a large stake in one of the most universal and depended-on forms of energy in the world, practically guaranteeing it will receive uninterrupted revenue for years to come.

Of course, I'm talking about oil stocks. Their stable demand and reliable dividend payments make oil stocks an undoubted favorite among income investors.

Yet despite being wildly popular in the income universe, most people are missing out on the world's best opportunities in this sector...

#-ad_banner-#That's because despite being oil stock, investors think the stocks I'm about to tell you about carry too much risk. They've never heard of most of these companies, so they automatically dismiss them as speculative growth plays.

Nothing could be farther from the truth.

Let me explain...

Many investors seeking a reliable income stream have been flocking to big oil stocks that have paid healthy dividends over the past few years.

That's to be expected. The steady income offered by some of these companies easily bests the typical S&P 500 stock. Chevron (NYSE: CVX ) for example, pays a 3.6% dividend yield right now -- almost double the 1.9% yield offered by the average stock in the S&P 500.

One of the most popular oil stocks around is Exxon Mobil (NYSE: XOM ). Next to only Apple, Exxon is the most profitable company in the United States, bringing in an incredible $32.6 billion in profit in 2013. That's roughly as much profit as behemoths Wal-Mart and J.P. Morgan Chase brought in combined last year.

Yet despite how much profit the company makes, Exxon Mobil's stock still pays a dividend yield of just 2.6%.

While I wouldn't sneeze at a 2.6% yield or even a 3.6% yield, it's only a fraction of what you can receive from this industry.

In fact, I've found an oil stock that pays an 10.5% dividend yield right now . And better yet, unlike traditional oil stocks, it also offers investors the chance to see potentially incredible capital appreciation.

What's the catch? There isn't one. It just so happens that this company doesn't do business in the U.S. But you can buy shares without even leaving the U.S. stock exchanges.

The stock I'm talking about is SeaDrill (NYSE: SDRL ) -- one of the largest offshore drillers in the world, with an enterprise value of more than $33 billion and diversification across the shallow, mid and deepwater segments of the market.

The Norway-based company also has one of the industry's most modern fleets, best margin profiles and pays a dividend that is roughly three times the yield of the 10-year Treasury note.

When most investors think of large oil stocks, they don't think about growth. But that's not the case for SeaDrill.

The Gulf oil spill of 2010 delivered a crushing blow to the offshore drilling industry. With domestic regulators restricting new drilling permits, shares of offshore drillers with and without exposure to the Gulf of Mexico fell sharply.

But now, more than three years later, the offshore drilling industry is on the cusp of a renaissance.

On the heels of new off-shore discoveries, growing global energy demand and the depletion of land wells, the offshore drilling industry is set to grow to $121 billion in 2018 from $73 billion in 2013. That's a compound annual growth rate of more than 10% in the next five years.

That places the offshore drilling industry in position to deliver big returns -- and SeaDrill is primed to take advantage.

The company currently has 21 rigs on order or under construction due for delivery through the end of 2016. With a current fleet count of 69, the new rigs will increase its rig count by 30% in the next three years.

The new rig releases will help drive revenue growth in what is already shaping up to be a strong 2014 for the company. In recent third-quarter results SeaDrill announced it had entered an agreement with PEMEX, the Mexican state-owned petroleum company, to provide five jackup rigs for six years starting in the first half of 2014.

The deal is expected to produce more than $1.8 billion in revenue and provides entry into the Mexican offshore market that should grow substantially in the next few years.

More importantly, it also increases the company's backlog of contracted rig services to more than $18 billion and enhances long-term revenue and earnings visibility, with 90% of its fleet booked for 2014 and 60% already booked for 2015 .

Strong revenue and earnings growth will support SeaDrill's two key goals: finance new rig builds and increase dividend payments.

SeaDrill also remains committed to delivering robust dividend payments to shareholders. It paid out $1.4 billion in dividends in 2011, $2.1 billion in 2012 and $930 million in the past two quarters.

It also doesn't hurt that the company increased its dividend by 8% last year, or that it's raised its dividend 7% annually for the past five years.

And after its most recent quarterly dividend increase to $0.95 per share, SeaDrill offers a dividend yield of 10.5% at recent prices , or more than three times the return of the 10-year Treasury note's yield of 2.7%.

Of course with investing, no stock is guaranteed to make you money... even an oil stock.

But stocks like SeaDrill prove that some of the world's best high-yield securities aren't located in the United States. In fact, out of the 118 companies we found paying yields over 12%, only 25 of them are located in the U.S. The other 93 of the world's highest-yielding stocks are international companies.

Fortunately, many of these are traded publicly on the New York Stock Exchange. To learn more about investing in high-quality international dividend payers and to see a detailed list of stocks paying 12%-plus yields , simply follow this link .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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