Nordic American Tankers
Formed in June, 1995, Nordic American Tankers (NAT) was incorporated in Bermuda and started trading on the New York Stock Exchange (or NYSE) in September, 1995. With homogenous and interchangeable fleet, NAT was formed to acquire and charter three double-hull Suezmax tankers that were built in 1997.
Trading at a market cap of $786.6 million, the company records a dividend yield of 5.4% and a beta of 1.13. Over the past year, the company’s share price has risen 9.7% overall, compared to 2.5% in the Dow Jones. Meanwhile, its peers—DHT Holdings Inc. (or DHT), Teekay Tankers Ltd. (TNK), Navios Maritime Acquisition (NNA), and Tsakos Energy Navigation Ltd. (TNP) recorded gains of 11.7%, 25.3%, 4.5%, and 5.8%, respectively. The Guggenheim Shipping ETF (SEA) has recorded gains of 2.1% in the past year.
In the fall of 2004, NAT owned three vessels and at the end of 2013 it owned 20 vessels—Suezmax tankers. Its tankers average ~156,000 deadweight tonnage (or dwt) each. With only one type of vessel in its fleet, NAT has the ability to streamline operating and administration costs, which sustains its cash-breakeven point low.
Recently, the company took delivery of its 21st Suezmax vessel. With the delivery of its sister ship, the company will account for a total of 22 vessels in operation by early August, 2014.
The company’s chartering policy is to operate their vessels either in the spot market or on short term time charters. In order to protect itself from weak environment, NAT may consider charters at fixed rates when the spot market is trading lower than time charter rates. None of the company vessels were employed on time charters during 2013 or the 1Q14.
NAT’s Suezmax tankers are interchangeable assets within the Orion Tankers pool because any pool vessel may be offered to the charterer for any voyage. After the withdrawal of Frontline’s nine Suezmax tankers from the Orion pool, effective January, 2013, Orion Tankers became the wholly-owned subsidiary of NAT. The commercial and technical management of its vessels have been outsourced to third-party companies operating under the supervision of the manager.
Let’s move on to see how the company’s unique business model supports its strong dividend policy.