Ship Finance Has Been Misjudged

Ship Finance International Ltd. (SFL) has declared a 60¢ dividend for shareholders of record as of December 23. This marks the 19th straight quarter that Ship Finance has maintained or increased its dividend. Based on Wednesday’s closing price the stock carries a hefty 22.6% yield. I am expecting a nice pop in the share price today.

When looking at the numbers for Ship Finance, first ignore the 65¢ per share net income. The structures of its ship leases do not include the profit built into the leases into net income. What is called the operating revenues of $114 million, or $1.57 per share is the free cash flow the company has to pay the dividend, pay down debt or invest in more ships.