16.9%-Yielding Nordic American Tankers Stock Paid 103rd Consecutive Quarterly Dividend
Why NAT Stock Has Been Rising in Value
Shares of Nordic American Tankers Ltd (NYSE:NAT) have been ripping higher over the last two years, up by approximately 170% since early 2022. And thanks to one industry dynamic, it looks like Nordic American Tankers stock could continue its bullish run over the next two to three years.
Nordic American Tankers is a marine shipping company that acquires and charters double-hull tankers in Bermuda and internationally. It currently has a fleet of 19 Suezmax crude oil tankers. (Source: “Overview,” Nordic American Tankers Ltd, last accessed June 7, 2023.)
Suezmax ships are medium-sized oil tankers that are the biggest ships that can travel through the Suez Canal. They’re about 900 feet long and have a storage capacity of 120,000 to 200,000 deadweight tonnage (dwt). They can carry between 800,000 and 1.0 million (or more) barrels of oil. They’re primarily used for long-haul routes, like from Saudi Arabia to the U.S.
With fears of a recession still looming, you wouldn’t think now would be the time to look at marine shipping stocks. Ships move various commodities and products, and if the demand isn’t there, marine shipping companies’ earnings will likely fall.
But there are a few reasons why investors should keep NAT stock on their radar.
Oil Prices Expected to Climb
First, although oil prices are down to $72.00 per barrel from their March 2022 high of $130.00 per barrel, crude oil could hit $100.00 per barrel by the end of the year.
That’s because of ongoing oil production cuts by the Organization of the Petroleum Exporting Countries Plus (OPEC+).
Moreover, Saudi Arabia recently announced that, starting in July, it will be cutting its own oil production by another million barrels per day, with that cut extending through 2024. (Source: “Saudi Arabia to Cut Oil Output by 1 Million Barrels a Day in July,” Aljazeera, June 4, 2023.)
Scarcity of Suezmax Tankers Translates to Compelling Market
Second, the biggest reason that Nordic American Tankers Ltd is entering a historic period is the global scarcity of Suezmax tankers.
As of March 31, the world’s Suezmax fleet numbered 576, with only 19 vessels (three percent of the world’s Suezmax fleet) in working order. This was a historically low number. As of that date, Shipyards only had five Suezmax tankers for delivery for the rest of 2023, and there were just six Suezmax tankers in the order books for 2024. (Source: “Nordic American Tankers Limited (NYSE: NAT) – Report March 31, 2023 (First quarter 2023) – History in the Making!,” Nordic American Tankers Ltd, May 22, 2023.)
For 2025, only eight Suezmax vessels are expected to be delivered. In comparison, 32 Suezmax tankers were delivered in 2022.
The reemergence of the Asian economy following the COVID-19 pandemic is expected to have a positive impact on the oil market. So, why don’t companies just order more Suezmax tankers? The available shipyard capacity has, to a large extent, been booked for container, gas, and dry bulk ships, leaving very little capacity to build Suezmax tankers until at least 2026.
This is good news for companies that already have Suezmax tankers, like Nordic American Tankers Ltd.
Third, as of May 22, the shipping industry’s second-quarter seasonal slowdown had already bottomed. The bottom was at a level that, in previous years, would have been seen as peak season earnings.
Nordic American Tankers Ltd’s Q1 Net Income Up 29% Quarter-Over-Quarter
For the first quarter ended March 31, Nordic American Tankers announced that its net income climbed by 29% quarter-over-quarter to $46.9 million, or $0.22 per share. That was up from fourth-quarter 2022 net income of $36.0 million, or $0.17 per share. For the first quarter of 2022, the company reported a net loss of $27.0 million, or $0.14 per share. (Source: Ibid.)
The company also reported first-quarter net operating income of $54.6 million, compared to $43.7 million in the fourth quarter of 2022 and a net operating loss of $20.9 million in the first quarter of 2022.
Nordic American Tankers Ltd’s average time charter equivalent (voyage revenues minus voyage expenses, divided by number of days in a round-trip voyage) came in at $51,902 per day per ship in the first quarter of 2023, up from $49,035 in the fourth quarter of 2022.
The company’s spot prices have been trending higher, with 65% of its spot voyage days booked at an average time charter equivalent of $42,111 per day per ship. Note that 15 of the company’s vessels are in the spot market.
On top of that, Nordic American Tankers Ltd has one of the lowest debt levels among publicly traded tanker shipping companies. At the end of the first quarter, it had a debt of $168.0 million, or $8.9 million per ship.
Management Raised Dividend for 103rd Consecutive Quarter
Nordic American Tankers is known for its reliable dividends. In the first quarter, it paid dividends of $0.15 per share, for a current yield of 16.9%. This represents Nordic American Tankers stock’s 103rd consecutive quarterly dividend. (Source: “Dividends,” Nordic American Tankers Ltd, last accessed June 7, 2023.)
NAT stock’s dividends are based on the company’s net operating cash flow during the previous quarter. As a result, the dividend fluctuates from quarter to quarter. Yet, Nordic American Tankers Ltd has continued to pay even a small dividend after it has announced a net operating loss, like it did in the first quarter of 2022.
Nordic American Tankers stock’s price also tends to follow the company’s net operating position. Right now, thanks to strong financial results, shares of Nordic American Tankers Ltd have been climbing steadily, up by 20% year-to-date and 75% year-over-year.
Although NAT stock has already made market-crushing gains, it still has room to run. Analysts have provided a 12-month share-price target in the range of $4.95 to $6.00, which points to potential gains in the range of about 39% to 68%.
Chart courtesy of StockCharts.com
The Lowdown on Nordic American Tankers Stock
Nordic American Tankers Ltd owns one of the largest fleets of Suezmax tankers in the world. The company has a solid balance sheet, it has been reporting impressive earnings growth, and its outlook is bullish.
There’s a scarcity of Suezmax ships, and shipyard capacity isn’t expected to address the shortage until at least 2026. A high demand, small order book, and low number of Suezmax ships worldwide are expected to keep Nordic American Tankers Ltd’s earnings at higher levels than before. This bodes well for ultra-high-yielding NAT stock.