I love special dividends and the companies that pay them. I've said it before and I'll say it again; businesses that reward shareholders with one-time special dividends are sending a message that loyalty counts. Seacor Holdings' (NYSE:CKH) shareholders were rewarded handsomely in December when the company paid a $15 dividend to shareholders of record December 14, 2010, yielding about 13%. The reason for this generosity: it had far more cash than it needs to operate its business. I believe Seacor's diversified revenue streams will lead to additional special dividends in the future. It's not a case of if, but when.

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Diversified Revenues
Seacor operates in two areas: energy services and transportation, and logistics and commodity merchandising. It generates revenues from seven different segments with its offshore marine services, inland river services and aviation services responsible for a majority of its annual operating profits in 2009. These are definitely the key drivers of the business. Its revenue diversification should help weather any storm, whether economic or through Mother Nature.

Deepwater Horizon
The Gulf of Mexico oil-spill disaster was a boon to the company's fortunes in 2010. For the first nine-months ended September 30, revenues for its environmental services segment jumped 602% year-over-year to $711 million and operating income in the segment jumped a staggering 3500% from $5.7 million to $203 million. Seacor provided cleanup services for the one-time event and, although this work made the special dividend possible, we should all hope it doesn't happen again. The end-result: operating profits were about $190 million higher than normal. You can expect them to return to previous levels, somewhere between $5-10 million. (Find out how to put this important component of equity analysis to work for you, check out Analyzing Operating Margins.)

Current and Past Financials
It's important to remember that its current financials are skewed by the Deepwater Horizon cleanup. Before looking at the valuation of its stock in the next paragraph, I'll have to back these numbers out as best I can, so we have an apples-to-apples comparison. Seacor grew significantly in 2004-2005, acquiring Era Aviation for approximately $118 million and Seabulk International for $527 million. Since then, its revenues have never been less than $1 billion or its operating profits less than $200 million. The one analyst who covers the stock estimates 2010 revenues will be $2.6 billion with earnings per share of $12.23. In 2011, the analyst estimates revenues of $1.9 billion and earnings per share of $4.90. The revenue number seems about right, but the EPS is excessively low. Using a net margin of 8.4%, the same as in 2009, I get $7.64. In terms of revenues and profits for 2011, it should outdo its 2009 results.

Seacor Holdings and Peers

Company Forward P/E P/B P/S P/CF
Seacor Holdings (NYSE:CKH) 21.7 1.1 0.9 5.4
Bristow Group (NYSE:BRS) 12.2 1.1 1.4 11.3
Tidewater (NYSE:TDW) 14.9 1.1 2.6 11.6
Kirby (NYSE:KEX) 16.8 2.3 2.4 10.4
Hornbeck Offshore Services (NYSE:HOS) 29.5 0.7 1.5 4.5

Valuation Adjustment
As I look at the table above, I see a inexpensive stock compared to some of its peers. However, an adjustment needs to be made to Seacor's forward price-to-earnings ratio. The number in the table is based on the $4.90 earnings per share estimate, which I disagree with. Using the $7.64 number I came up with previously, I get a forward P/E of around 13.7. With the adjustment, Seacor is clearly the best value among its peers. (Learn more in Earnings Forecasts: A Primer.)

Bottom Line
Seacor is sitting on approximately $21 a share in cash after paying the special dividend at the end of 2010. While it's been looking for acquisitions, with too much money chasing too few deals, it's doubtful it will find a game changer like the Seabulk acquisition in 2005. Therefore, expecting another special dividend this year or next is not completely unreasonable. In the meantime, I feel you can buy the stock knowing you're getting a reasonable price.

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