Tag: FRO

Does a 20% Yield Mean Smooth Sailing or Choppy Seas Ahead?

by Fred Fuld III

The shipping stock sector [meaning companies that use ships for shipping, not FedEx (FDX) or UPS (UPS) type shipping] is one which is noted for its high yields. There are over a dozen that have yields of 5% or more, with one, Frontline Ltd. (FRO), forward yielding in excess of 13%. This Bermuda based company owns and operates oil tankers for transporting crude oil, coal and iron ore. 

Although the company has usually been paying dividends on a regular basis [usually March, June, September, and December) along with special dividends, the amount of the dividend has fluctuated dramatically, making it very difficult to determine what the yield really is. They stopped paying dividends during the COVID year of 2021, but started cup again in 2022.

Nordic American Tanker Shipping Ltd. (NAT) has paid quarterly dividends since 2001, but the dividend payments constantly change. It has a forward yield of 5.57%.

Remember, that just because a stock is paying a fairly consistent high yield, doesn’t mean that they will continue to do so and doesn’t mean that they won’t eliminate their dividend altogether. The price of the stock can drop far more than the dividends earned. In addition, many of these stocks have wide bid and asked spreads and low daily volumes. Do your research and assume worst case before setting sail on shipping stocks for their high yields. 

The following is a list of shipping stocks with high forward yields.

Frontline Ltd. (FRO) 13%
Nordic American Tanker Shipping Ltd. (NAT) 5.57%
DHT Holdings (DHT) 11%
Diana Shipping (DSX) 20%
SFL Corp. (SFL) 8.8%
Star Bulk Carriers Corp. (SBLK) 7.5%

Disclosure: Author did not own any of the above at the time the article was written.

What’s With These Super High Yields? 25% !!!

by Fred Fuld III

If you look through the high yield stocks that are extracted by stock screeners, you will notice that there are some outrageously high yields, some more than 25%; but are they genuine high yields? You will also find that different screeners come up with different results. So let’s look at some of the high yield dividend stocks.

Orchid Island Capital, Inc. (ORC) is a specialty finance company that invests in residential mortgage-backed securities in the United States. The stock pays monthly dividends and currently has a yield of 15.45%. It trades at 5.7 times trailing earnings and has a market capitalization of $505 million.

Frontline Ltd. (FRO) is a shipping company involved in the seaborne transportation of crude oil and oil products. The stock has a yield of 25.22% and has a price to earnings ratio of 5.67. The market cap is 1.57 billion.

Cornerstone Strategic Value Fund (CLM), Inc. is a closed-ended equity mutual fund that yields 16.6%, trades at 8.86 time trailing earnings, and has a market cap of $899 million. Dividends are paid monthly.

Rules for Investing in Very High Yield Stocks

1. Check the consistency in the number of payments per year.
2. Check the consistency in the amount of the dividend from quarter to quarter.
3. Check to make sure the dividend payment doesn’t include capital gains.
4. Check to make sure the yield isn’t generated by a special high year-end distribution.
5. Check to make sure that the dividends don’t exceed the stock’s earnings per share.
6. Check to make sure that your stock information provider is calculating the correct yield.

Disclosure: Author didn’t own any of the above at the time the article was written.