Ship Finance International Ltd. (NYSE: SFL) is seeing shares take it on the chin on Tuesday morning after news that the company is planning to sell some 8 million shares in a secondary offering. The good news is that the shares are being sold by the company. The bad news is that the share count increase likely will be noticed. We would also want investors to pay very close attention to how this offering can effect the high dividend payout by Ship Finance International.

The company plans to use the net proceeds of this secondary offering to invest in new assets within the shipping and offshore sectors, as well as for general corporate purposes and working capital. Morgan Stanley is acting as the sole book-running manager for the offering.

Ship Finance’s press release indicates that the common shares purchased by the underwriter “are expected to be offered for resale from time to time in negotiated transactions or otherwise, on the New York Stock Exchange at market prices prevailing at the time of sale, at prices related to such prevailing market prices or otherwise.”

Shares closed at $17.31 on Monday, and the stock is trading down almost 6% at $16.30 in somewhat active premarket trading, against a 52-week trading range of $13.85 to $17.98. The company had roughly 85.3 million shares prior to the new offering, and the shares being sold are under a current shelf registration with the SEC.

Investors may want to pay attention here because Ship Finance’s $0.39 quarterly dividend generates a dividend yield of about 9%. That payout of $1.56 annually compares to the Thomson Reuters consensus earnings estimates of $1.33 per share for 2013 and $1.37 per share for 2014. Earnings last year came to $2.31 per share.

24/7 Wall St. worries about companies that pay out a higher dividend versus its expected earnings. We particularly worry when these companies conduct secondary stock offerings, and “working capital” is used because that could easily be interpreted as saying “to maintain our artificially high dividend.” Our take is that this may just be juicing the books to keep that high dividend payment going.

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