An international tanker company and its primary business activity is the international seaborne transportation of crude oil.
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Shippers have taken it the hard way since the market downturn. Such pressure validates, to some degree, the management decisions to pursue long-term contracts. With P/E of about 10 today, and a strong dividend and balance sheet, this is the sort of stock that interests me. That is not to say this is a risk free play -- when does that ever happen -- and the company's contracts could expire before the sector improves, but we know that buying time is when good companies are in bad times. It's on my short list for my next dividend reinvestment.
I went in at $14.77 for 107 shares. I regard this stock as the riskiest one in my holdings, so I am unlikely to increase my position in it. I am betting on a market recovery, in the best case, or, in the worst case, the company's ability to endure in bad times. I think the company's track record over the past few years justifies entry at this juncture. Please wish me the good fortune of clear skies, smooth seas, and heavy cargo holds.
My broker has this service that scores advisers that they state is "an accuracy-weighted sentiment derived from the ratings of independent research providers." So how did VLCCF do? On a scale of 0-10, with zero being very bearish, this stock came in at a laughable 0.6 when I took my position. So almost zero. When you read these analysts opinions, however, the significant factor in their assessment seems to be that the stock price has decreased over the years. Never mind that it has remained a profitable company in a cyclical sector. The CAPS community here has a very different take doesn't it? I voted with my money and I sided with CAPS. This will be fun to see how it plays out.
Time to check in and see how it's doing. I'm down ($70) in value so that's not great. I made about $50 on the last dividend. That in turn, roughly speaking, paid for a share of VOD with room to pay the commission. So in a very approximate sense I'm down ($19) on the VLCCF position. I'm still trusting that the improving economy will trigger a rising tide that will lift this sector. Meanwhile, I'll coast along on the dividend payments. A warning sign: on a quarterly basis the current dividend yields are not sustainable. I don't know when they will release their annual data but I imagine it will be soon now. When that happens, I predict that it will show that they are upside down on the dividend payments for the year and they will have to adjust for that. Just a wild guess here, but I'll say that they will have to shave .2 off the quarterly dividends. Of course, the final quarter could change all that but, again, I guessing not. So if my predictions play out at some point I'll be making a yield on cost of a little more than 8%. Not horrible, and it's certainly rewarding me a fair bit for the higher risk of this position. This is definitely the wild child of my portfolio, but I'm content to have him around.