first_imgAn 8% yielding FTSE 250 dividend stock I’d buy for my ISA Roland Head | Tuesday, 25th February, 2020 | More on: PFC I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. The Petrofac Limited (LSE: PFC) share price is up by 2% at the time of writing, as the market gives a cautious welcome to the group’s 2019 results.Petrofac’s (modest) gain comes against a backdrop of falling share prices in the oil and gas sector. Today I want to explain why I think it’s time to buy into this turnaround story – despite the ongoing risks faced by shareholders.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Still shrinkingPetrofac doesn’t produce oil and gas – it provides engineering and services for companies that do. Since the oil market crash in 2015, the group has struggled to deliver the kind of results that once saw its shares trade at more than 1,700p. As I write, the Petrofac share price is just 367p.The group’s revenue has fallen from nearly $8bn in 2016 to just $5.5bn in 2019. A further decline is expected this year, when analysts expect turnover to fall to about $5.1bn.Profits have plunged, too. On an underlying basis, pre-tax profit fell from $463m to $381m in 2019. A further decline is expected for 2020.A potential riskOne problem is that Petrofac isn’t winning as much new work as it used to. In 2019, new orders totalled $3.2bn, compared to $5bn in 2018. As a result, the group’s order backlog fell from $9.6bn to just $7.4bn.A particular disappointment was that the company missed out on new contracts in Saudi Arabia and Iraq last year – core markets for the company, which does a lot of work in the Middle East.Why did the firm miss out on these contracts? One likely explanation seems to be that Petrofac is under investigation by the UK’s Serious Fraud Office in relation to past contracts in both countries.This investigation started in 2017. So far, Petrofac hasn’t been charged. Nor have any of the company’s current directors or employees. But it’s not over yet. There’s still a risk that the company could face a big fine at some point.I suspect this is one reason why management is keeping debt levels low – Petrofac ended last year with net cash of $15m.Too risky to touch?You could definitely make a case for avoiding Petrofac altogether, given the risk from the SFO investigation and the company’s declining profits.But the company is winning new work and remains profitable and cash generative. It’s also hoping to expand into the renewable market – one recent contract win will see the company supply electrical substations for the Seagreen wind farm project in the North Sea.Offshore wind farms require some of the same engineering services as oil and gas platforms. Petrofac could be well positioned to compete in this market.Why I’d buyBased on today’s figures, the company is valued at less than six times 2019 operating profits. Although 2020 is expected to be another poor year, I think Petrofac shares are cheap enough to reflect the risks faced by shareholders.The SFO case will be resolved at some point, providing greater certainty. And the chief executive owns 18.8% of the company, suggesting that his interests should be aligned with those of smaller shareholders.In the meantime, the 8% dividend yield is covered by free cash flow and looks safe enough to me. I see the shares as a contrarian buy and would be happy to add the stock to my Stocks and Shares ISA. Image source: Getty Images. Enter Your Email Address Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!center_img “This Stock Could Be Like Buying Amazon in 1997” I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Roland Head Our 6 ‘Best Buys Now’ Shares Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Simply click below to discover how you can take advantage of this.last_img read more