Ship Finance May Be Looking To Grow The Business Again

A high-yield play on shipping, Ship Finance (SFL) has never been the easiest stock for investors to follow. Between eccentric non-GAAP accounting, little sell-side coverage, and share price volatility tied to the volatile and cyclical shipping industry, the shares have moved around a fair bit over the last five years. While the dividend has been more stable for about two years, it is still more than 20% below the peak ($0.45/share, last paid in Q1’17), and an uncommonly high yield has long been one of the key attractions of this stock.

Appreciating that the dividend is relatively safe (but far from guaranteed), this continues to look like a good option for investors willing to take on some higher risk in the pursuit of higher yields. The company has a significant portion of revenue locked up until multiyear time charters with high-quality counterparties and an empty order book should mean substantial cash flow coming in over the coming years. While I’d like to see management prioritize debt reduction and an increased payout, investors should be prepared for capital deployment into M&A, as it still sounds as though that’s where management’s attention is now.

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Ship Finance May Be Looking To Grow The Business Again