LPG Stock: Outlook for 11.5%-Yielder Bullish on Industry Tailwinds
October 2, 2024
Dorian LPG Stock Has 46% Upside Potential
Dorian LPG Ltd (NYSE:LPG) has been having a solid year, with its stock rising approximately 30% over the last year. LPG stock actually hit a new record high of $50.29 in late May, but it has given up some ground since then. As of this writing (September 23), the stock is trading hands at $34.33 per share. But thanks to industry tailwinds, Wall Street analysts think Dorian LPG stock could return to those record levels in the next 12 months.
Dorian is a liquefied petroleum gas (LPG) shipping company that should benefit from strong global demand for the product. Used for residential heating, cooking, and industrial purposes, LPG plays a crucial role in the energy market, serving as a cleaner alternative to traditional fossil fuels.
According to one research report, the LPG market, currently valued at $101.7 billion, is expected to hit $144.7 billion by 2030, expanding at a compound annual growth rate (CAGR) of 4.2%. (Source: “Liquefied Petroleum Gas (Lpg) Market Growing Exponentially at a CAGR of 4.2% is Expected to Reach USD 144.70 Billion by 2030,” WhaTech, September 23, 2024.)
More recently, demand for LPG from China remains resilient, surpassing market expectations. Despite gloomy economic data, China’s seaborne imports in July hit a record high 1.4 million barrels per day (mmb/d), with total imports over the first eight months of the year up roughly 10% on an annual basis. (Source: “China’s LPG demand resilient despite economic headwinds,” Vortexa, August 27, 2024.)
Meanwhile, India’s total LPG imports are projected to increase by a whopping 41% by 2035. LPG use, which totaled 0.9 mpd in 2023, is expected to rise significantly as the country continues to increase its use for LPG for cleaner cooking fuels. (Source: “India’s oil demand to jump by 2 million b/d by 2034, LPG imports to rise by 41%: S&P Global,” EconomicTimesIndia.com, September 20, 2024.)
And these near- and longer-term trends, coupled with increasing North American LPG export capacity and rising global seaborne LPG volumes should keep LPG prices competitive, which bodes well for Dorian LPG Ltd.
About Dorian LPG Ltd
The Stamford-Connecticut-based company is an LPG shipping firm and leading owner and operator of 25 modern very large gas carriers (VLGCs). These large vessels are capable of carrying up to two million barrels of oil. (Source: “Investor Presentation August 2024,” Dorian LPG Ltd, last accessed September 23, 2024.)
One of the three largest operators of VLGC tonnage, the average age of its fleet is nine years, far newer than the global fleet average of 10.6 years.
Dorian LPG Ltd has many long-term contracts with some of the energy industry’s biggest names, including BP plc (NYSE:BP), Chevron Corp (NYSE:CVX), Exxon Mobile Corp (NYSE:XOM), Phillips 66 (NYSE:PSX), Shell PLC (NYSE:SHEL), and Petroleo Brasileiro ADR (NYSE:PBR), more commonly referred to as Petrobras.
Dorian has taken steps to take advantage of industry tailwinds and increase its fleet size. It recently completed a successful equity offering, selling two million of its shares for $44.50 per share, with an option to sell an additional 300,000 shares. That equates to gross proceeds of $89.0 million, or $102.3 million if the option is exercised. (Source: “Dorian LPG Ltd. Announces Pricing of Public Offering of 2,000,000 Common Shares,” Dorian LPG Ltd, June 6, 2024.)
Strong Momentum Carries into Fiscal 2025
Following a record fiscal 2024, Dorian continues to report strong results in fiscal 2025. For the first quarter of fiscal 2025 ended June 30, 2024, the company announced that revenues increased 2.5% year over year to $114.4 million. (Source: “Dorian LPG Ltd. Announces First Quarter Fiscal Year 2025 Financial Results,” Dorian LPG Ltd, August 1, 2024.)
Dorian reported first-quarter net income of $51.3 million, or $1.25 per share, down slightly from $51.7 million, or $1.28 per share, in the same period last year. Adjusted net income was up 5.7% at $51.7 million, or $1.26 per share.
Dorian’s average time charter equivalent (TCE) rates increased eight percent on an annual basis to $55,228 per day. Its vessel operating expenses per day inched up to $10,717 from $10,383 in the same prior-year-period.
LPG Stock Pays $1.00-Per-Share Dividend
Returning value to shareholders is an important part of Dorian’s business. Since its 2014 initial public offering (IPO), LPG stock has returned over $777.0 million in cash to shareholders through dividends and buybacks.
Thanks to strong earnings and cash flow generation, the company was able to declare an irregular first-quarter dividend of $1.00 per share, returning $42.6 million to shareholders. This works out to an annual distribution of $4.00 per share, for a forward yield of 11.56%.
That ultra-high yield dividend is safe, too; LPG stock’s payout ratio is just 52.8%.
46%+ Upside Potential with LPG Stock?
LPG stock has been on a pretty solid run over the past two years, hitting a new record high this past May. While Dorian LPG stock has given up some of those gains, its outlook remains solid, with Wall Street analysts providing a 12-month share price target range of $44.00 to $50.00 per share. This points to potential upside of approximately 29% to 46.5%.
The high forecast of $50.00 per share would put LPG stock within sight of its May record high of $50.29 per share.
Chart courtesy of StockCharts.com
The Lowdown on Dorian LPG Stock
Dorian LPG Ltd is a great oil and gas midstream stock that reported record fiscal 2024 results with that strong momentum carrying into fiscal 2025. The outlook for Dorian remains robust; U.S. natural gas liquids production is still strong as is global demand. To meet that demand, Dorian has raised close to $100.0 million in equity, which should help it expand its vessel count.
On the passive income front, including the most recently announced $1.00 quarterly dividend, LPG stock has returned over $777.0 million to shareholders since its May 2014 initial public offering (IPO). Since its IPO, the company’s board has also repurchased approximately 33% of its outstanding shares.
