Did This Company Just Go From Yielding 0% to 9.4%?
A New High-Yield Stock to Think About?
Everyone loves a comeback story. But for investors, it’s not easy to put money into a stock before the storm is over. For instance, most people expected the economic impacts of the COVID-19 pandemic to be temporary, but few of them bought stocks when the market crashed earlier last year.
One impressive comeback story features Golden Ocean Group Ltd (NASDAQ:GOGL), a dry bulk shipping company.
GOGL stock tumbled alongside the market in February and March 2020. While there was a rebound, Golden Ocean stock had a tough time finding upward momentum from May to November 2020. Afterward, though, it went on a strong rally, as the chart below shows.
In fact, at $10.60 apiece as of this writing, GOGL stock’s price is now more than double its pre-pandemic level.
Golden Ocean Group Ltd (NASDAQ:GOGL) Stock Chart
Chart courtesy of StockCharts.com
And there’s a very good reason why Golden Ocean stock deserves investor attention even after its strong comeback: dividends.
You see, the COVID-19 pandemic has led to many things in the investment world, one of which was the reduction—and in some cases, suspension—of dividends across industries.
In the case of Golden Ocean Group, the company paid a dividend of $0.05 per share in March 2020 and then didn’t issue any more payments—until now.
On May 20, 2021, Golden Ocean Group announced a cash dividend of $0.25 per share for the first quarter of 2021. That’s five times as high as the last dividend it paid! (Source: “GOGL – First Quarter 2021 Results,” Golden Ocean Group Ltd, May 20, 2021.)
If you annualize the new dividend amount and divide it by GOGL stock’s price at the moment, you’ll arrive at an annual yield of 9.4%.
In other words, with just one announcement, Golden Ocean stock went from being a zero-percent yielder to becoming a near-double-digit yielder. And if you look up GOGL on Google Finance or MarketWatch, you’ll see that 9.4% is indeed the figure in the yield section of the company.
However, I should point out that simply annualizing the company’s quarterly dividend may not provide the most accurate picture. Sure, that’s the yield you see on financial portals, but dividends from the shipping industry can vary from quarter to quarter. Even before the pandemic, GOGL stock’s dividend didn’t stay the same every quarter. For instance, the company paid $0.10 per share in September 2019, $0.15 per share in December 2019, and—as mentioned earlier—$0.05 per share in March 2020. (Source: “Dividend,” Golden Ocean Group Ltd, last accessed May 28, 2021.)
That said, the company’s business has improved a lot compared to last year. In fact, Golden Ocean earned net income of $23.6 million ($0.14 per share) in the first quarter of 2021, which marked the best first-quarter result in the company’s history.
Moreover, emerging economies, which have historically been the primary drivers of dry bulk demand, are starting to rebound. And the commodity supercycle that’s getting started should only add fuel to the fire. Industry forecasts suggest that, in the dry bulk shipping market, demand is on track to outpace supply through 2023. That would lead to increasing fleet utilization and a strong freight-rate environment. (Source: “RESULTS Q1 – 2021,” Golden Ocean Group Ltd, May 20, 2021.)
Regarding Golden Ocean’s dividend policy, the company’s chief executive officer, Ulrik Andersen, said, “We are always cautious not to paint too optimistic of a picture, but our first quarter dividends of $0.25 per share should provide a good indication for where we think the market is headed.” (Source: “Golden Ocean Group Limited (GOGL) CEO Ulrik Andersen on Q1 2021 Results – Earnings Call Transcript,” Seeking Alpha, May 20, 2021.)
Here’s the bottom line: dividends from the marine shipping industry are probably not carved in stone, but with the improving macroeconomic environment and a reinstated payout, Golden Ocean stock is now worth a look for income investors.