10 stocks to buy now

Our second energy-related stock may pay off faster than Devon. Indeed, what stands out about Diamond Offshore is its home-run potential - Barclays Capital has a $134 price target for the shares, which are now $66 - as well as the protection shareholders get from its hefty dividend should the stock market continue to slide.

Diamond is a contract driller; it has 46 offshore rigs and drill ships, which it leases to oil companies such as Apache and Petrobras. While day rates for offshore rigs have been under pressure, most of Diamond's rigs are covered by long-term contracts. According to Goldman Sachs analysts, 89% of Diamond's revenues for 2009 are already locked in (the most of any offshore driller), as are 71% of 2010 revenues. And as oil prices move back up, demand for drilling - and Diamond's services - will surge.

Diamond's shares trade for a mere six times 2009 profits, but what we really like is the yield. Unlike other drillers, Diamond distributes the bulk of its earnings as dividends. The total quarterly payout (regular dividends plus special dividends that have become quite regular) now stands at $2 a share, which works out to an annualized dividend yield of 12%.



NEXT: Fluor