Monday, February 23, 2015

Noble, NE Bond at a Discount

A Bond for Income Investors

Historically, bonds have been a major portion of an income investor’s portfolio.  But the 30 plus year bull market in bonds have rendered most bonds so expensive, yielding so poorly, that the average income investor cannot afford bonds.

Those high yield bonds that are available are hardly worth the risk.

With all that in mind, I occasionally find the bond of a stock that has decent fundamentals but has gotten hammered because of some outside influence.   In this case, the outside influence is the price of oil and gas.   

Buy at a Discount

When you buy at a discount and your bond matures, you get back more money to then reinvest.  Often times, a bond will improve so much that you can sell it early at a premium.   I do not think that will happen with this bond, yet just two years ago the bond profiled here traded at over $110.    I will be very happy to get back my principle and receive the coupon twice a year.

Noble Holding 4.9% 2020 Senior Debt

Noble Holding Company, symbol NE, is an oil and gas drilling company.  Trading at About $18.61 today. D/E ratio of .64 is within the industry standard of .64.  Interest coverage ratio is 9.62 which is comforting.

Noble has several bonds available in the 5 – 7 year maturity range. The bond I bought has a coupon of 4.49%, matures August 1, 2020.   Selling at a discount to par of $95.60 (price from for a Yield to maturity (YTM) of 5.857%.

This bond is considered investment grade with a rating of Baa3 and BBB by two agencies.  It is continuously callable with no survivor option.  At the very minimum you will receive par when called and remember with bonds you receive interest income for every day you own the bond.

CUSIP # is 65504LAC1

Consider this NE senior, investment grade, discount bond for the income investing portion of your portfolio.

Disclosure:  Long CUSIP 65504LAC1