Nordic American Tankers has provided shareholders with a bigger-than-expected dividend despite a slump in third-quarter earnings, as the company pointed to signs that the final three months of the year will see strong results.
The New York-listed suezmax tanker owner reported net income of $7.49m for the third quarter, a drop from the $10m reported a year earlier.
But Evercore ISI analyst Jonathan Chappell said the earnings per share of $0.04 was in line with his forecast and only a penny shy of average expectations on Wall Street.
What was not in those predictions was NAT’s dividend of $0.06 per share, which looked to the analyst like the Herbjorn Hansson-led company was reverting to its tradition of providing substantial payouts to shareholders.
“The third quarter 2023 dividend of $0.06 per share exceeded expectations and marked a return to the 100-plus-percent payout days when earnings could not justify a payout,” Chappell said in a note to clients.
But NAT also pointed to expectations for a strong winter peak, backed by bookings for the fourth quarter so far that exceed expectations, as well as a market environment of robust demand and low tanker supply.
Norway-based NAT reported net voyage revenue of $48m during the third quarter, up from $47.4m a year earlier. Operating expenses rose to $33.6m from $30.2m.
Time charter equivalent rates for the third quarter came in at just over $31,200 per day, up from $27,900 in the same quarter of 2022. The company had 15 of its ships in the spot market during the period, with the remaining four on time charters.
For the fourth quarter so far, that figure has risen to nearly $43,200 per day, with about 73% of spot voyage days booked and a newly acquired ship joining the fleet next week.
“There is a scarcity of our type of ships, leading to better results and [a] higher dividend,” Hansson said in a message to shareholders.
He said the shortage of suezmax tanker supply comes as world oil demand is expected to rise next year.
“For decades, the experience is that uncertain times create demand for our ships,” he said, pointing also to positive economic signs.
“The US economy is on the right track and China is also taking steps to stimulate its economy. Oil will continue to be an important commodity for all major economies for a long time.”
Chappell said that in the fourth quarter, those bookings trended above his expectations, leading Evercore to lift its earnings estimate by $0.03 to $0.14 per share.
But he highlighted third-quarter general and administrative expenses that jumped 47% compared to the same period of last year and were “the highest absolute quarterly G&A level in the nearly 30-year history of the company” — limiting NAT’s upside potential.
Higher interest rates resulting from an extension of NAT’s debt maturity also led the analyst to drop his 2024 earnings forecast by two pennies to $0.49 per share.
NAT’s third-quarter figures maintained a significant improvement in the company’s fortunes for the first nine months of the year, with net profit coming in at $81.2m compared to a loss of $20.9m in the same period of 2022.
