Nordic American Tankers' (NYSE:NAT) Shareholders Will Receive A Bigger Dividend Than Last Year
Nordic American Tankers Limited's (NYSE:NAT) periodic dividend will be increasing on the 12th of October to $0.03, with investors receiving 200% more than last year's $0.01. Even though the dividend went up, the yield is still quite low at only 2.0%.
Check out our latest analysis for Nordic American Tankers
Nordic American Tankers' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Despite not generating a profit, Nordic American Tankers is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 0.8%, so there isn't too much pressure on the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $1.20 in 2012 to the most recent total annual payment of $0.05. The dividend has fallen 96% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Company Could Face Some Challenges Growing The Dividend
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Nordic American Tankers has impressed us by growing EPS at 25% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.
We should note that Nordic American Tankers has issued stock equal to 27% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Nordic American Tankers will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Nordic American Tankers has 3 warning signs (and 2 which make us uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
