Capital allocation policy
DHT Holdings (DHT) announced a capital allocation policy in July 2015, and the company updated it in 4Q15. DHT’s policy is to return at least 60% of its ordinary net income to its shareholders. It also intends to use a significant amount of its surplus cash after dividends to deleverage its balance sheet. In addition, DHT has announced a plan to repurchase its own shares.
DHT Holdings announced a dividend of $0.21 per share to be paid at the end of February 2016. Total quarterly cash dividends for 2015 reached $0.69 per share. This was the highest dividend given by DHT in the last three years. Wall Street analysts estimate the company’s 2016 dividend to be $0.90 per share.
A coverage ratio is calculated as a company’s cash flows over its dividends. It’s a measure of a company’s ability to pay dividends. A higher ratio is generally a healthy sign. A ratio of less than 1 indicates that a company’s cash flows are less than its dividends paid, which may also indicate that its current level of dividends is not sustainable in the long run. The company’s coverage ratio is very high at 8.9 for the fourth quarter.
DHT’s current dividend yield is 14.4%, while Wall Street analysts’ consensus estimate for its forward dividend yield stands at 15.4%. The following are the dividend yields for other crude (DBO) tanker companies:
- Teekay Tankers (TNK) has a dividend yield of 11.4%.
- Nordic American Tanker (NAT) has a dividend yield of 15.3%.
- Euronav (EURN) has a dividend yield of 4.9%.
- Tsakos Energy Navigation (TNP) has a dividend yield of 4.3%.
Investors who are interested in broad exposure to industrials can invest in the SPDR Dow Jones Industrial Average ETF (DIA).
In the next article, we’ll look a bit further into DHT’s balance sheet.