Double-digit dividend yields often come with a substantial "but" attached. The junk in the trunk in the case of Ship Finance (SFL)
comes in both the form of the significant ownership stake of shipping
magnate John Fredriksen, as well as the company's heavily entwined
dealings with other Fredriksen companies like Frontline (FRO) and Seadrill (SDRL).
While
the shipping industry is still in rough shape, I don't think Ship
Finance gets enough credit for the moves it has made to diversify into
operations like offshore drilling (admittedly, another boom-bust
industry) and offset the risk of customer defaults. A default from
Frontline would certainly be noisy and negative, but not nearly as
harmful to underlying cash flow and dividend support. With these shares
trading below what appears to be fair value on an EBITDA and NAV basis,
and paying a 10%-plus yield as of this writing, I believe Ship Finance
is an attractively-priced, albeit risky, way to play shipping and
collect a large dividend.
Please continue here:
Ship Finance Offers Good Returns For Above-Average Risks
No comments:
Post a Comment