Wednesday, March 18, 2015

North American Tankers: Is The Dividend Sustainable?

Nordic American Tankers (NAT) has been an attractive stock to yield-seeking investors for quite some time. The company last quarter raised its dividend to $0.22 per share from $0.14 per share. Based on yesterday’s closing price of $10.31, you can own a stock that currently yields 8.6%. Is this a good deal or not?

The company’s management likes to remind us that since NAT’s founding in 1997 it has paid a dividend for 70 consecutive quarters, which seems like an eternity in the shipping industry. The only problem is that if you decide to buy the stock today it will not be for its dividend history, but for its capacity to pay dividends in the future. 

In this article I will focus on the company’s dividend policy but instead of analyzing the past I will try to answer a more poignant question: Is the current dividend sustainable over the next five years? I will try to answer this question first by looking at the company’s capacity to generate cash from operations. But I will also look at the company’s fleet and the capital expenditure requirements to replace its ageing vessels.
Continue reading the full article published on Seeking Alpha Pro.

No comments:

Post a Comment