Yahoo Finance Nordic American Tankers (NYSE:NAT) Is Paying Out A Larger Dividend Than Last Year
The board of Nordic American Tankers Limited (NYSE:NAT) has announced that it will be paying its dividend of $0.05 on the 20th of December, an increased payment from last year's comparable dividend. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Nordic American Tankers
Nordic American Tankers' Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Even in the absence of profits, Nordic American Tankers is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 1.0%, which makes us pretty comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from $1.20 total annually to $0.05. Dividend payments have fallen sharply, down 96% over that time. 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
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Nordic American Tankers has impressed us by growing EPS at 25% per year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.
An additional note is that the company has been raising capital by issuing stock equal to 21% of shares outstanding in the last 12 months. 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.
Nordic American Tankers' Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Nordic American Tankers you should be aware of, and 1 of them doesn't sit too well with us. Is Nordic American Tankers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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