How many are expecting a dividend cut? I have seen shipping company after shipping company cut the dividend. I know their business model is different, but management these days seems to want to hold on to cash at costs.
Great info, maybe by chance, VBG, I own the one stock that seems somewhat safe on the dividend front.
I keep telling myself that the bear market is good in that that is when fortunes are made when prices are high and nobody wants stock.... I just hope I live to see it turn around..
Thanks for the info.
The way they are structured they must pay out 90% of earnings in dividends ( I'm pretty sure it's 90% ) in order to avoid paying corp. income tax. If they held back more than 90% of earning then they would be taxed at what ever the corporate rate is. As long as they can get financing to buy ships I don't see any reason for them to change their business model. So if you want to forcast the dividend, just take 90% of projected earnings and that should be your number.
<< How many are expecting a dividend cut? I have seen shipping company after shipping company cut the dividend.>>
Shipping companies have been cutting their divs either because their charters are failing or because they expect to buy some slightly used ships, cheap. SFL doesn't really engage in fleet expansion outside of sale/leaseback deals. SFL's fleet is chartered to mostly FRO, SDRL, and HRZ. So far, FRO/SDRL seem to be operating in the black (neglecting investment losses), so I would interpret any reduction in dividend as a very negative outlook for those two companies.
FRO accounts for something like $350M annual revenues (w/o profit share) and SDRL something in the range of $400M. No other lessees are even close. Something like 50% of the corporate debt is off balance sheet and attributable to the SDRL drillships, so the SFL's long term health is very closely tied to SDRL performance. So far, SDRL's charters seem to be holding up, despite some delivery problems, and the main reason to cut the dividend would be against the expectation that will not continue.
My impression is that the drillship debt is off balance sheet, as investments in subsidiaries, to facilitate the shedding of those drillships and associated debt in the event that SDRL can't honor its covenants. It does have the advantage of making SDRL's debt:equity look better than it really is, but their presentations have been pretty explicit about this arrangement, and I don't think it's an attempt to obscure their books.
I just read S&P's coverage of SFL today, actually, and they seemed to think that the div was safe and likely to continue to rise, somehow. I thought, too, that it said that their ships were chartered ENTIRELY to FRO in unbreakable (my word) contracts. Anyone here with TDAmeritrade (and other online services?) can see this, so maybe someone could post this info. I'd do it myself, but I'm leaving for the day as soon as I finish typing this sentence.
I think it might be cut but only slightly. I'm guessing maybe $.50. But who knows? Anything can happen in this market. But lets say they cut it in half to $.30. That's still an 11% yield at today's closing price. The stock would then take a hit, but any price drop would increase the dividend yield. I think you need a long term game plan. Let's face it, this is going to be a bad year. But in the long term we'll do fine. If you add to your position each month, you'll accumulate the stock at low prices. If you can get it on dips like this one, that's even better. By the end of the year, you'll have a lot of shares for when things improve. In the meantime, you collect whatever dividend they hand out. Since you're dollar cost averaging, the stock price isn't that important. Over the next 5 yrs, the price will tripple and you'll have the dividend as a bonus.
Dividend history looks stable
19-Dec-08 $ 0.60 Dividend
28-Aug-08 $ 0.58 Dividend
13-Jun-08 $ 0.56 Dividend
22-Feb-08 $ 0.55 Dividend
23-Nov-07 $ 0.55 Dividend
29-Aug-07 $ 0.55 Dividend
6-Jun-07 $ 0.55 Dividend
6-Mar-07 $ 0.54 Dividend
5-Dec-06 $ 0.53 Dividend
29-Aug-06 $ 0.52 Dividend
8-Jun-06 $ 0.50 Dividend
2-Mar-06 $ 0.45 Dividend
25-Nov-05 $ 0.45 Dividend
1-Sep-05 $ 0.50 Dividend
8-Jun-05 $ 0.45 Dividend
3-Mar-05 $ 0.50 Dividend
22-Nov-04 $ 0.45 Dividend
26-Aug-04 $ 0.35 Dividend