Improving Rates And Capital Deployment Should Better Support Ship Finance's Dividend

Through the severe ups and downs of the shipping industry, Ship Finance (SFL) has managed to roll with the punches better than most. Although the annualized total return over the past decade including dividends isn’t so impressive next to the S&P 500, the company has done considerably better than the “average” shipping company (more than a couple of which went bankrupt) and has consistently paid a dividend despite significant disruptions at major client companies.

Ship Finance has also evolved with the time, and I believe the company is in fairly solid shape today. Not only is the company placed to benefit from rising rates in containerships and dry bulk, the company has been actively deploying capital into cash flow-generating assets and could likely deploy several hundred million dollars more into productive assets. Although I don’t think the shares offer all that much appreciation potential, I believe the dividend will be increasingly better-supported by cash flow in the coming years and I think the yield offers a decent return relative to the risk.

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Improving Rates And Capital Deployment Should Better Support Ship Finance's Dividend