Ardmore Shipping's fourth quarter performance allowed it to pay its first dividend in 12 quarters, but that doesn't mean chief executive Anthony Gurnee is happy about it.
The product and chemical tanker owner's $2.5m adjusted profit for the last three months of 2019, triggering a $0.05 per share dividend, the company's first since the third quarter of 2016.
"Admittedly, we're not very happy about paying a cash dividend when our share price is trading at a substantial discount to NAV, but that's our current policy," Gurnee said on the company's earnings call this week.
Ardmore's New York Stock Exchange-listed shares opened at $5.54 and quickly shot up to $6.17 after its positive earnings release.
The company - which has its operational headquarters in Cork, Ireland - also disclosed its MR tankers were earning $19,800 per day in the first quarter and its chemical tankers $19,600.
But shares had been on a slide since the start of the year, beginning 2020 at $9.14, before bottoming out at $5.36 Monday.
Ardmore's experience has been consistent with other tanker owners, who, after dealing with several lean years, are working to gain back investor confidence in the face of coronavirus lowering oil demand in China.
"When thinking about the impact of the coronavirus on tanker company values, it's worth keeping in mind these values are underpinned by hard assets with 20-year useful lives," Gurnee said.
"In this context, the across-the-board 40% drop in tanker stocks over the past few weeks is, in our opinion, overdone to say the least."
Gurnee would not say whether or not the company's current policy of paying out 60% of earnings from continuing operations was under review. He said the company could buy back shares with its $51.7m in cash, but that reducing debt would be a priority.
"What I will say is, our board discusses dividend policy at most meetings, at least informally," he said. "I would expect that to continue."
Analyst reaction
Jefferies' Randy Giveans maintained his 2020 and 2021 EPS estimates of $1.01 and $1.09 on the company's first quarter fleet guidance. The price target remained at $12.
Giveans said some seasonal pullback on tanker rates were expected in the first quarter, but the coronavirus pushed them even further down.
"That said, this increased volatility has also created new arbitrage trading for jet fuel from Eastern markets into Western markets," he wrote.
"In the longer term, we expect rates to strengthen in the coming quarters as additional global refinery capacity is completed in the Middle East and Asia."
