Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

May 18, 2011 - Diamond Offshore Drilling, Inc.(DO-NYSE) operates as an offshore oil and gas drilling contractor worldwide. The company provides offshore drilling services in the deepwater, harsh environment, conventional semisubmersible, and jack-up markets to independent oil and gas companies and government-owned oil companies. As of December 31, 2009, it operated a fleet of 47 offshore rigs consisting of 32 semisubmersibles, 14 jack-ups, and 1 drillship. The company was founded in 1989 and is headquartered in Houston, Texas. Diamond Offshore Drilling, Inc. is a subsidiary of Loews Corporation.

Investors have to be comfortable with the uncertainty of this arrangement to receive this relatively high yield. For this year, that payout looks almost certain since earnings are predicted to be $6.44. Last year, earnings were $6.70. The year before that: $9.89. For 2012, 36 analysts have a consensus estimate of $5.42. As you can see, the direction here is down.

But there are some caveats that go with the dividend. While the company has no large cash requirements until 2013 when the balance to pay for certain equipment is due, a downturn in the industry (even more than the recent price drop in oil) or financing for another rig could require the current cash position to be diverted from the dividend. Another possible cash drain: upgrading the fleet. Some analysts suggest the special dividend may be in jeopardy after 2013.

Right now, there isn't a concern with solid earnings looking almost certain at over $6.00 a share. Still, dayrates for the best equipment are coming down. Fewer orders for mid-water rigs in favor of deep-water drilling equipment is more the norm now. And low natural gas prices have curtailed revenues in the shallow-water rig group.

Essential numbers: Revenues have decreased over the last 3 years, going from $3.54 billion to $3.32 billion. This year, 30 analysts have a consensus estimate of $3.28 billion, then $3.21 billion next year. Market Cap is $10.09 billion. Trailing P/E is 11 and the Forward P/Eis 13.4. Price to sales ratio is 3.00. Price to book is 2.46. Book value is $28.72. Operating margin is 39.19% and Profit margin is 27.99%. Return on equity is 23.97% and Return on assets is 12.01%. Total cash is $995 million. Total cash per share is $7.16. Total debt is $1.50 billion or 27% of capital. Total debt to equity is 37.46%. Current ratio is 4.34. Beta is .76. There are 139.03 million shares Outstanding with a Float of 68.9 million shares. Insiders own .01% of the stock. Loew's Corp. owns 50.4%. Institutions have 92.3% of the Float.

While revenues and earnings are moving in the wrong direction at the moment, this stock has seen price levels of $149 only 3 years ago when earnings were almost $9.50 a share. With most of its success dependent on the price of oil, investors can expect the volatility of the black gold to direcly affect the stock price. Still, income investors should be able to count on a good yield for the next few years, coming in the form of dividends that are both regular and special.