What Dividend Investors Need to Know about Crude Tanker Companies
Taking Stock of Crude Tankers: A Look at Five Companies
Dividend yield
Dividend yield measures how much cash flow investors are getting from each dollar they invest in a company. It’s calculated by dividing a company’s annual dividend by its share price. A company that consistently pays out dividends may be valued more highly, as it attracts income investors.
High-dividend-yield stocks can be a good source of income for investors, but this income may come at the cost of growth. Paying out dividends means a company isn’t reinvesting that money into itself or deleveraging, which could affect how it will perform in the future.
A company’s dividend yield should be looked at alongside its payout ratio. The payout ratio tells us how much a company is paying in dividends in relation to its cash flows or profits.
Companies that have high dividend yields may be paying more dividends than what is sustainable, which could lead to dividend cuts in the future.
Nordic American Tankers’ long dividend history
Nordic American Tankers (NAT) has paid dividends for 74 consecutive quarters. As the company operates only in the spot market, its earnings are not predictable and are also volatile. This makes the company’s dividends volatile as well. NAT’s current dividend yield is 11.9% and its dividend coverage calculated based on its cash flow is 1.0.
Euronav’s dividend yield
From 2011 to 2014, Euronav (EURN) didn’t pay any dividends. In the second quarter of 2015, it introduced a new dividend policy to distribute at least 80% of its previous year’s annual net profit. Its dividend yield stands at 13.2%.
Other companies’ dividend yields
Teekay Tankers’ (TNK) current dividend yield is 12.9% and its coverage ratio based on its cash flow is 1.4. DHT Holdings (DHT) intends to return at least 60% of its ordinary net income to its shareholders. The company’s current dividend yield is 14.7% and its dividend coverage ratio is 3.2.
Tsakos Energy Navigation (TNP) has paid a constant dividend of $0.06 for the past five quarters, which gives it a dividend yield of 5.3% and a coverage ratio of 13. Investors interested in broad exposure to the industrials sector could invest in the SPDR Dow Jones Industrial Average ETF (DIA).
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