London shipping fund Tufton Oceanic Assets is raising its dividend sights in improved tanker markets.
“Encouraged by strong visible cash flows from increased charter cover, diversification and continued supply-side recovery”, the company said it has lifted its annual payout target from $0.08 to $0.085 per share, starting from the fourth quarter.
The listed shipowner said it is paying out $0.02 per share for the third quarter. Net asset value (NAV) stood at $456.3m on 30 September.
The NAV total return for the quarter was 3.3%.
The company believes tanker prospects look good due to a low orderbook and more long-haul cargoes due to the war in Ukraine.
“These market dynamics are likely to be magnified as new EU sanctions on Russian oil products become effective in Q1 2023, likely outweighing negative impacts from slowing GDP growth and the supply reductions from OPEC+,” Tufton said.
Benchmark time-charter rates for MR tankers have risen 110% since the beginning of the year.
Chemical tanker rates are also at their highest level since 2008.
“Some product/chemical tankers have shifted away from chemicals to meet the rising clean cargo demand,” Tufton said.
These product vessels typically carry 25% to 30% of chemical cargoes.
Bulker improvement coming
Tufton has one container ship remaining in what it sees as a weakening market, as port congestion unwinds and consumer demand is negatively impacted by high inflation and tightening monetary policy.
Bulkers continue to be supported by a small orderbook.
But Tufton said the market declined during the quarter as demand growth was hit by a slower-than-expected improvement in Chinese economic activity following the Covid-related lockdowns over the summer, coinciding with the easing of port congestion.
However, the owner believes an improvement is around the corner.
Tufton’s average expected charter length has increased to 1.4 years as it said product tankers — now a bigger part of the portfolio — are de-risked with longer-term charters.
The operating profit in the quarter was $0.039 per share — or $12m.
