SFL Corporation Stock: 10.6%-Yielder Has 58% Upside
November 20, 2024
SFL Corporation Declares 83rd Consecutive Quarterly Dividend
After President-elect Donald Trump’s decisive election win, the stock markets have been on fire, with the S&P 500, Dow Jones Industrial Average, and Nasdaq all ripping to new highs.
It’s not a total surprise; Trump bases his presidential success, in large part, on how the stock market performs. This helps explain why the businessman implemented so many pro-business reforms during his first presidency. It’s also why so many investors are afraid of missing out on the current stock market rally.
Not all stocks have been enjoying the ride. Marine shipping stocks like SFL Corporation Ltd (NYSE:SFL) continue to feel pressure on concerns about global economic growth. That said, these headwinds will eventually pass, which means some beaten-down marine shipping stocks are actually sitting in attractive ranges.
SFL Corporation is an international marine infrastructure company that owns and controls a $4.1-billion portfolio of 73 vessels and rigs. Whereas many marine shipping companies specialize in specific industries, like oil and gas, SFL’s fleet diversity gives it legs through multiple market cycles. (Source: “Q3 2024 Results Presentation,” SFL Corporation Ltd, November 12, 2024.)
SFL Corporation’s contract duration on its shipping portfolio consists of:
- 7.5 years for its 39 containers
- 7.8 years for its seven car carriers
- 3.9 years for its 15 dry bulk ships
- 4.0 years for its offshore vessels (oil rigs)
- 4.3 years for its 18 tankers
This provides the company with stability in both revenue and operating costs. It also helps juice SFL Corporation stock’s reliable high-yield dividend.
Some of its customers include Maersk, Koch, Phillips 66 (NYSE:PSX), and ConocoPhillips (NYSE:COP).
The company’s fleet size is always in flux as it evolves to meet industry demand. SFL Corporation took delivery of two newbuild, long-range product tankers in August and October and the delivery of two chemical tankers in August.
Third-Quarter Net Profit More Than Doubles
For the third quarter ended September 30, 2024, SFL Corporation announced that revenue climbed 33.7% quarter over quarter to $255.3 million. (Source: “Preliminary Earnings Release Q3 2024,” SFL Corporation Ltd, November 6, 2024.)
Third-quarter net income was up 115% at $44.5 million, or $0.34 per share. The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $158.8 million from consolidated subsidiaries, plus an additional $7.9 million in adjusted EBITDA from minority-owned associated companies.
SFL Corporation ended the quarter with $164.0 million in cash and liquidity.
83rd Consecutive Quarterly Dividend Declared
Thanks to its reliable cash flow, SFL Corporation stock is able to provide shareholders with a reliable, growing dividend. At least over the last few years. In 2021, it paid out a total of $0.68 per share, rising to $0.92 per share in 2022 and $0.99 per share in 2023.
In November, SFL Corporation declared a quarterly dividend of $0.27 per share, or $1.08 on an annual basis, for a current yield of 10.62%.
As is always the case on Wall Street, nothing goes up forever. SFL Corporation stock’s dividend payout can fluctuate depending on market conditions. As you can see in the chart below, the company reduced its payout to save cash during the worst economic crisis in 100 years, from $0.35 to $0.15. Since it began raising its dividend again in the third quarter of 2021, SFL has raised it seven times. (Source: “Dividend History,” SFL Corporation Ltd., last accessed November 12, 2024.)
Even after being tested through multiple market cycles, SFL has paid a dividend every quarter since going pubic in 2004.
58% Upside Potential with SFL Corporation Stock?
Despite the solid third-quarter results, SFL Corporation stock has been facing some pressure, currently down 4.8% in 2024. On the plus side, SFL stock has inched up one percent over the last 12 months.
The outlook for beaten-down SFL Corporation stock remains solid though, with Wall Street projecting that it will hit fresh highs over the coming quarters. Analysts have provided a 12-month share price forecast of $16.00 per share, which points to potential gains of 58%. It would also put SFL stock well above its record high of $14.08 per share from May 2024.
Chart courtesy of StockCharts.com
The Lowdown on SFL Corporation Stock
SFL Corporation Ltd is a diversified marine shipping company with a highly predictable cash flow from long-term contracts. It also has a massive fixed-revenue backlog of $4.7 billion; of that, two-thirds is relate to customers with an investment-grade rating.
