It is no secret that investors love dividends. The higher the better, particularly if they are safe dividends or if they are rising ones. The chairman and chief executive of Nordic American Tankers Ltd. (NYSE: NAT), Herbjorn Hansson, has issued an open letter to shareholders in an effort to “underpromise and overdeliver.” Ultimately the letter notes that the tanker business could be at an inflection point, after being down since the financial crisis in 2008. The big kicker here is of course that its dividend is likely to rise — and it is now possible that it could have an annualized yield of 10% or more.

The tanker market has seen a very strong start to 2015, the most active in years. The falling price of oil has had a similar impact on the tanker industry as it has for the airline industry, overall a net positive. The end result of this looks to be a strong dividend from Nordic.

Earlier in the week, Hansson increased his stake in the company by 50,000 shares in an outright showing of confidence for the direction Nordic American is headed.

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Note that Nordic American has a low-cost breakeven point of $12,000 per day, whereas it currently expects to achieve rates in the region of $35,000 per day for its fleet in the first quarter of 2015. With this extra cash, the company looks to increase its dividend.

Hansson announced a “significantly higher” dividend:

Our commercial performance this quarter should result in a significantly higher dividend than in the fourth quarter of 2014 and is a fine testament to the income potential and commercial results of our fleet. An announcement of the first quarter 2015 dividend can be expected in mid-April. As we move into the second quarter, the tanker market remains encouraging.

At this time, there is much more to the current upswing in the tanker market than the reduced oil price. The balance between the fundamentals of the industry and supply and demand of transportation services has been improving for some time. At least that is the message from Nordic American Tankers.

The company has said that demand for tankers has risen as both volumes and trading distances for these vessels have increased, while a slow increase in the number of tanker vessels in operation worldwide has been working for this demand in the background as well. The CEO also said in his open letter:

The tanker market is near a perfect model of supply and demand, producing high volatility. Demand shifts unpredictably, from time to time following macroeconomic and geopolitical developments. The rise of US oil production and lower imports have caused some concern among those who failed to look at the global picture. Crude previously bound for the US is headed in other directions with longer travel distances requiring more vessels to handle the volume.

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Note that Nordic American has a very erratic dividend history. In 2014 alone, dividends paid ranged from roughly $0.12 to $0.22, and on top of this the dividend was changed each quarter. If we look back even further, we can see dividends drop from $0.86 all the way to $0.09. Needless to say, the income volatility creates dividend volatility. The current yield based on that $0.22 payout being annualized would be right at 8%.

If Hansson is saying that the “significantly higher dividend” is coming, could the 8% yield rise to 10%? It could, but we will not know for sure until the formal announcement is made.

Sure, the tanker market may see smooth sailing in its immediate future, but its dividend history should call into question how long it will be before dividend volatility, or income volatility, will return. No one can predict the exact price of oil ahead, but T. Boone Pickens recently suggested on CNBC that oil prices will make a recovery in the next 12 to 18 months.

Shares of Nordic American Tankers were up 5.5% at $11.41 in Thursday morning trading. The stock has a consensus analyst price target of $11.89 and a 52-week trading range of $6.95 to $12.08. Shares were at $20 back in 2011, and they were far higher longer ago than that.

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