This post is part of a special annual report — Top Stock Picks ’09 — in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
As the name implies, Dividend Superstars focuses on quality income-generating ideas. Here, Nilus Mattive looks to Patterson-UTI (NASDAQ: PTEN) as his top “contrarian” idea for 2009.
“For the Dividend Superstars Annual Forecast Issue, I screened for companies that had zero debt, single-digit P/Es, recent dividend hikes, payout ratios under 25%, a dividend coverage ratio exceeding 2.
“While it was a tall order, one company jumped to the top of my list: Patterson-UTI. As one of the biggest land-based drillers in North America, the company is highly correlated to demand and prices for that commodity.
“Recently, that hasn’t been a good thing, especially because the slowing economy and tight credit has made companies less inclined to drill. The shares have gotten, well, drilled!
“But everything is cyclical. And Patterson-UTI has the financial wherewithal to weather the storm. It also has plenty of money to dole out to shareholders.
“To be sure, this stock is a contrarian play. But I wouldn’t be surprised to see it rebound quickly at any hint in rising energy prices or renewed drilling activity. And the yield is very attractive. Together, that gives the stock superior total return potential for 2009.”
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