Ocean Yield is maintaining investor payouts for the first quarter, but the Norwegian shipowner warned the pandemic will mean lower returns to shareholders.
The company was previously aiming for a dividend of 15 cents.
But it said this would now be less and added: "The spread of the coronavirus combined with a significant drop in the oil price have created substantial market volatility."
The Kjell Inge Rokke-backed company has a diversified fleet of 72 ships.
Of these, 68 are on long-term, fixed-rate charters to 18 operators.
Ocean Yield has paid dividends every quarter since the company was listed in 2013, and the focus on dividends will be continued, it vowed.
The level will be decided by the board on 5 May.
Payout halved?
Fearnley Securities is estimating a payout of 7.5 cents, which would be a 16% yield.
Analysts Espen Landmark Fjermestad, Gustaf Amle and Ulrik Mannhart said the guidance "should be no surprise" given that the stock has more than halved so far this year.
Many companies are now withdrawing or reducing payouts to preserve cash during the virus outbreak.
"For the equity story in Ocean Yield, dividends remain important, but given the shaky macro backdrop we understand that more headroom is needed," they added.
Fearnley said the 7.5 cent level "can work", even in an environment where most oil service-related backlog is lost, including for its floating production, storage and offloading vessel.
"That is a cushion very few companies can match — and implies incremental dry powder of circa $500m," the investment bank added.
The reduced dividend will allow it to grow its equity ratio to about 35% and hold cash of $250m, the analysts said.
But free cash flow would be negative to the tune of between $20m and $30m should it lose charter payments from Hoegh Autoliners. The vehicle carrier segment is being heavily hit by the pandemic.
But the investment banking arm of shipbroker Fearnleys views this as "highly unlikely", as the company would typically be able to reduce debt servicing in the event of loss of hire.
'Buy' rating still in place
Fearnley has maintained a "buy" rating on the stock, with the target price reduced from NOK 78 ($6.96) in February to NOK 45 on higher cost of capital assumptions. It is currently NOK 21.50 in Oslo.
Ocean Yield posted net profit of $9.6m in the fourth quarter, up from a loss of $49.9m in the same period of 2018.
Revenue grew to $65.8m from $64.2m, as it took delivery of seven vessels in the period.
The 2019 figure included an increase of $7.7m in provisions related to decommissioning and field abandonment in India, where its FPSO unit Dhirubhai-1 was operating.
The full year showed a net loss of $39.9m.
Ocean Yield has an average charter backlog duration of nearly 11 years.
