Investors love dividend stocks, especially the ultra-high-yield variety because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
It has been reported that of the 888 VLCCs that are viable for trade worldwide, 95, or more than 10% of the fleet, currently reside under U.S. sanctions. Top analysts feel that the Trump administration’s “Maximum Pressure” stance could dramatically increase that number. The Jefferies analyst feels capacity utilization could reach 94% from the current 88%. They note that when utilization was last that high from 2019 to 2020, day rates hit a stunning $95,000 daily.
A new research report from the Jefferies Maritime Group makes a strong case for owning three top VLCC companies. All are rated Buy and pay ultra-high-yield dividends. The firm noted this in its report:
Increased US sanctions are shrinking the compliant tanker fleet with each passing week. Yet the oil markets are relying on this fleet to move the same
number of barrels, which will stretch its capabilities in the coming months. Eventually, sanctioned exports, currently transported by the dark fleet, will
plummet and entice producers with spare capacity to boost output. This will put further strain on the fleet and likely send VLCC spot rates to cyclical highs.
Here are Jefferies three Buy-rated VLCC companies:
DHT
DHT is an independent crude oil tanker company. Its fleets trade internationally.
Trading under $12, with a solid 6.08% dividend, this company could be a total return home run. DHT Holdings Inc. (NYSE: DHT) is an independent crude oil tanker company. The Company’s fleet trades internationally and consists of crude oil tankers in the VLCC segment.
Its primary business is operating a fleet of crude oil tankers, and its secondary activity is providing technical management services.
The company operates its vessels through its subsidiary management companies in:
- Monaco
- Norway
- Singapore
- India
Its principal activity is the ownership and operation of a fleet of crude oil carriers, which currently number approximately 28 vessels.
The fleet operates globally on international routes. The company’s fleets among others are comprised of:
- DHT Addax
- DHT Antelope
- DHT Gazelle
- DHT Impala
- DHT Appaloosa
- DHT Mustang
- DHT Bronco
- DHT Colt
- DHT Stallion
- DHT Tiger,
- DHT Harrier
- DHT Puma
- DHT Panther
- DHT Osprey
- DHT Lion
- DHT Leopard
- DHT Jaguar
- DHT Taiga
- DHT Sundarbans
- DHT Scandinavia
The Jefferies price target is $15.
Frontline
Frontline is the world’s fourth-largest oil tanker shipping company.
While off the radar of most investors, this shipping company’s stock could explode higher and comes with a massive 7.55% dividend. Frontline PLC (NYSE: FRO | FRO Price Prediction) engages in the seaborne transportation of crude oil and oil products worldwide. It owns and operates oil and product tankers.
In a press release earlier last year, the company announced it would sell its five oldest VLCCs (very large crude carriers), built in 2009 and 2010, for an aggregate net sale price of $290 million.
After repaying existing debt on the vessels, the transaction was expected to generate approximately $207 million in net cash proceeds.
Frontline expected to record a gain in 2024 of roughly $68 million to $76 million, depending on the delivery date of each vessel to the new owner. According to industry standards, the sale was subject to certain closing conditions.
Following the transaction and the completion of the delivery of all 24 VLCCs acquired from Euronav NV, Frontline’s fleet will consist of 84 vessels comprised of:
- 41 VLCCs
- 25 Suezmax tankers
- 18 LR2/Aframax tankers
The Jefferies price target for the stock is $25.
International Seaways
International Seaways is one of the largest tanker companies worldwide, providing energy transportation services for crude oil.
Those looking for ultra-high-yield stocks will love this VLCC giant, which pays shareholders a massive 12.56% dividend. International Seaways Inc. (NYSE: INSW) is a tanker company that provides energy transportation services for crude oil and petroleum products in international flag markets.
The company operates through two segments:
- Crude Tankers
- Product Carriers
The Crude Tankers segment consists of a fleet of VLCCs, Suezmaxes, and Aframaxes engaged in the worldwide transportation of crude oil.
This segment also includes its Crude Tankers Lightering business, through which it provides ship-to-ship (STS) lightering support services and full-service STS lightering to customers in these regions.
- United States Gulf
- United States Pacific,
- Grand Bahama, and
- Panama
The Product Carriers segment consists of a fleet of MRs, LR1 product carriers, and an LR2 product carrier engaged in the worldwide transportation of refined petroleum products.
International Seaways owns and operates a fleet of about 82 vessels, including:
- 13 VLCCs
- 13 Suezmaxes
- 5 Aframaxes/LR2s, 13 LR1s (including six new buildings)
- 38 MR tankers
Jefferies has set a $58 target price.
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