A $0.10-per-share dividend declared by Diana Shipping in connection with a public spin-off is expected to become a regular feature, a leading analyst said on Thursday.
New York-listed Diana declared the payout, its first since 2008, as part of its announcement on Tuesday that it is spinning off older vessels into a separate Nasdaq-traded entity called OceanPal.
Jefferies lead shipping analyst Randy Giveans told clients that while Diana has not declared a dividend policy as such, he expects the payout will stick around.
"The announced dividend shows the company's confidence in the current market strength prevailing as the long-term supply/demand picture remains robust," he wrote.
In the absence of a formal policy, future payments will probably come at the board's discretion, Giveans projected.
"With that being said, DSX operates primarily on multi-month time charters, which provides the company with more stable earnings to support a fixed dividend than a pure spot market operator," he wrote, referring to Diana's ticker symbol.
"As such, we expect the dividend to be maintained at $0.10/share throughout 2022, providing an attractive yield of about 7%."
The yield is measured against Diana's current stock price, which has been in the neighbourhood of $5.50.
If the payout indeed becomes regular, Diana will join Star Bulk Carriers, Genco Shipping & Trading and Eagle Bulk Shipping as dry bulk owners that have recognised the resurgent market by either restarting or enhancing quarterly dividends.
Investment banker Mark Friedman of New York's Evercore recently told TradeWinds that dry owners have been increasingly responsible in their decisions to return capital to shareholders, making sure their coffers are in strong shape.
"The shipping companies have gotten more prudent about strengthening the balance sheet first and making the distribution second,” Friedman said.
Connecticut's Eagle Bulk Shipping was the latest to unveil a new policy. The owner of 53 supramax and ultramax bulkers announced on 4 October that it will pay out at least 30% of net income per quarter, but no less than $0.10 per share.
Noble Capital analyst Poe Fratt has told clients that Eagle's third-quarter number could be $1.76, with about $5.75 per share to be handed out for all of 2022.
Greece's Star Bulk instituted a variable dividend policy before the pandemic that has roared back to life in the dry bulk recovery. The high-payout model could reach $4 per share for all of next year, Giveans estimated.
New York's Genco Shipping & Trading also has opted for a high-payout variable policy effective with earnings in the current quarter. Giveans has estimated the distribution could be $3 per share for all of 2022.
According to its website, Diana’s fleet consists of 36 bulkers from panamax to newcastlemax. The three oldest units in the existing fleet will make up the initial OceanPal roster, while more bulkers are earmarked to join over time, based on their vintage.
