Dorian LPG Stock: Bullish 8.9%-Yielder Reports Record-High Net Income
May 29, 2024
LPG Stock Trading at Record-High Levels
Dorian LPG Ltd (NYSE:LPG) is a great midstream energy stock I’ve been following closely for the last couple of years. And for good reason. Strong industry tailwinds have seen it go from strength to strength.
In 2022, Dorian LPG stock ripped 108% higher. In 2023, it rallied by an even more impressive 171%.
LPG stock has also been doing exceptionally well in 2024, climbing by 10.4% year-to-date and 32% over the last three months (as of this writing). On May 23, it hit a new record high of $47.67. Moreover, Dorian LPG stock is up by 448% since I wrote about it in Income Investors in February 2022 and up by 199% since I wrote about it in January 2023.
And thanks to record-best results in the company’s fiscal year 2024—which included record-high net income and time charter equivalent (TCE) rates—and solid guidance, the outlook for LPG stock is robust.
Dorian LPG is a liquefied petroleum gas shipping company and a leading owner and operator of 25 modern very large gas carriers (VLGCs). (Source: “Investor Presentation: May 2024,” Dorian LPG Ltd, last accessed May 23, 2024.)
VLGCs are capable of carrying up to 2.0 million barrels of oil.
The average age of Dorian LPG’s fleet is nine years, meaning its fleet is newer than the global fleet’s average age of 10.7 years.
Dorian LPG Ltd has long-term contracts with some of the energy industry’s biggest names, including BP plc (NYSE:BP), Chevron Corp (NYSE:CVX), Exxon Mobil Corp (NYSE:XOM), Phillips 66 (NYSE:PSX), Shell PLC (NYSE:SHEL), and Petroleo Brasileiro (NYSE:PBR)—more commonly known as Petrobras. (Source: “Company Summary,” Dorian LPG Ltd, last accessed May 23, 2024.)
From a fundamental perspective, the outlook for Dorian LPG is robust.
Thanks to its strong balance sheet and the resilient marine shipping market, the company is expanding its fleet. It recently entered an agreement for a newbuild VLGC ammonia carrier. That vessel is expected to be delivered in the third quarter of 2026. (Source: “Dorian LPG Ltd. Announces Fourth Quarter and Fiscal Year 2024 Financial Results,” Dorian LPG Ltd, May 22, 2024.)
Dorian LPG Ltd said it will be also be upgrading its VLGCs to ship ammonia to take advantage of the expected growth in the trade of that chemical for the hydrogen economy.
Chart courtesy of StockCharts.com
Record-High Fiscal 2024 Net Income & TCE
What shareholder doesn’t like to read about record-best financial results and solid guidance?
For the fourth quarter of its fiscal year 2024 (ended March 31, 2024), Dorian LPG reported net income of $79.2 million, or $1.96 per share, up from $76.0 million, or $1.89 per share, in the same period last year. (Source: Dorian LPG Ltd, May 22, 2024, op. cit.)
The company’s TCE rates were up by six percent, at $72,202 per day, from $68,135 per day in the fourth quarter of fiscal 2023. Its vessel operating expenses in the fourth quarter of fiscal 2024 inched up to $10,699 per day from $10,528 per day in the same prior-year period.
Dorian LPG Ltd’s full-year net income jumped by 78% year-over-year to a record-high $307.4 million, or $7.60 per share. Its adjusted net income in the full fiscal year was also $307.4 million, up by 81% year-over-year. Its TCE rates advanced 31% in fiscal 2024 to $65,986 per day, from $50,462 per day in fiscal 2023.
Looking ahead, management is optimistic about the company’s medium-term and long-term prospects, with increased liquefied petroleum gas exports from North America and high demand in the Far East, principally in India and China.
Furthermore, as mentioned earlier, Dorian LPG is expanding its fleet to meet the increased demand for ammonia.
Dorian LPG Stock Pays Dividends of $1 Per Share
Returning value to shareholders is an important part of Dorian LPG Ltd’s business. Since its 2014 initial public offering (IPO), Dorian LPG stock has returned more than $730.0 million in cash to its shareholders through dividends and stock buybacks.
In its fiscal year 2024, the company paid four irregular dividends totaling $162.2 million, or $4.00 per share. It has paid dividends for 11 of the last 12 quarters, totaling $12.50 per share, or more than $500.0 million.
Dorian LPG Ltd recently declared an irregular cash dividend of $1.00 per share. (Source: “Dorian LPG Ltd. Common Stock (LPG) Dividend History,” Nasdaq, last accessed May 23, 2024.)
As of this writing, that translates to a forward yield of 8.87%.
LPG stock’s high-yield dividend is safe; the company’s payout ratio is just 53.05%, which is well below the 90% threshold I’m willing to stomach. This gives the company more than enough financial wiggle room to maintain or raise its quarterly payout.
On the share buyback front, Dorian has reduced its share count by 33% since its IPO.
The Lowdown on Dorian LPG Ltd
U.S. natural gas liquid production has been strong and shows few signs of slowing down. Global infrastructure expansions and optimizations should support the growth of U.S. liquefied petroleum gas production and exports. Moreover, the high demand for liquefied petroleum gas in the Far East should be a boon for Dorian LPG Ltd.
The company recently announced a record-breaking fiscal year, with record-high TCE rates and net income.
It also continues to have a strong balance sheet, with $282.5 million in cash and cash equivalents and $605.0 million in total debt as of the end of March 31. About 93% of its debt is fixed or hedged. (Source: “Investor Presentation: May 2024,” Dorian LPG Ltd, op. cit.)
On the passive income front, including its recently announced quarterly dividend of $1.00 per share, Dorian LPG stock has returned more than $730.0 million to shareholders since its IPO. The company’s board has also authorized a $100.0-million share repurchase program with no expiration date.
