Clarksons Securities is backing International Seaways to follow the John Fredriksen playbook on dividend hand-outs.
The Frontline owner is a big shareholder in the US-listed tanker company and has stated his intention to try to work with management on boosting shareholder value.
This is despite Seaways adopting “poison pill” measures to prevent him increasing his holding.
Seaways declared a special dividend of $1 per share for the third quarter, on top of a regular pay-out of $0.12.
Clarksons Securities had earlier predicted that outsized earnings in the tanker market would be paid to shareholders as a special dividend or in conjunction with share buybacks.
And the investment bank is anticipating higher pay-outs in the future, given low leverage, a robust cash balance of $256m at the end of the quarter, and management statements on the intention of returning capital to shareholders.
“Seaways is unlikely to have a set pay-out formula, but we suspect it could take a cue from John Fredriksen, who has a history of paying out generous dividends based on whatever is earned quarterly, sometimes in full, sometimes in part, depending on liquidity needs,” analysts Frode Morkedal and Even Kolsgaard said.
“What matters, we believe, is establishing a track record of delivering significant shareholder returns, which Seaways is well on its way to accomplishing,” they added.
Clarksons Securities is estimating a dividend yield of 19% in 2023, assuming a payment ratio of only 60% of earnings per share (EPS).
“There is certainly the possibility that cash pay-outs could be higher than this, and a projected EPS of $14.60 for 2023 implies an earnings yield of 32%,” the analysts said.
The third-quarter result was Seaways' best ever.
But adjusted Ebitda of $157m was still below consensus of $163m.
Seaways has said it is “seeking to work constructively” with the Fredriksen team. The tycoon has a 16.6% stake in the shipowner.
