Back to top

Value

It's been a rough couple of years for most of the global vessel companies. But Ship Finance International Limited (SFL - Snapshot Report) is still expanding its fleet and rewarding shareholders with a huge yield. This Zacks #1 Rank (Strong Buy) is also a value stock, with a forward P/E of 9.8.

Ship Finance International owns 62 vessels and rigs and is under contract on 7 additional newbuildings. It has long term fixed charters, with an average length of about 11 years.

Ship Finance Beat In Q1

On May 24, Ship Finance reported preliminary first quarter results and surprised on the Zacks Consensus by 28.6%. Earnings were 45 cents compared to the consensus of 35 cents.

During the quarter the company took delivery of four drybulk newbuildings. It also terminated 5 bareboat charters with Horizon Lines and received $40 million in second-lien bonds plus equity warrants as compensation.

Revenue, however, slipped to $186 million from $193 million in the fourth quarter of 2011. But Ship Finance said the tanker market outperformed most analysts' expectations in the quarter and this contributed to revenue through the new cash sweep arrangement with Frontline, which brought in $13.6 million.

Dividend Raised

The big story with Ship Finance is the juicy dividend.

The Board of Directors raised the quarterly cash dividend to 39 cents from 30 cents the previous quarter.

Shares are now yielding a whopping 9.9%.

The company has a strong track record of paying something every quarter as it has paid a dividend for 33 consecutive quarters which impressively includes the Great Recession, when most shipping companies got crushed.

The Zacks Consensus Estimate for 2012 Rises

The 2012 Zacks Consensus Estimate has jumped 22% to $1.59 from $1.23 just 60 days ago. However, analysts don't expect earnings growth as the company made $1.67 in 2011.

Valuation Is Attractive

Unlike most other stocks, shares of Ship Finance have actually rallied throughout 2012 and were recently at a new 2012 high.

But it still has value characteristics.

Along with a P/E under 15, which is my cut-off for value, it also has a price-to-book ratio of 1.4. A P/B ratio under 3.0 usually means value.

Additionally, Ship Finance also has a 1-year return on equity (ROE) of 15.9% which is above that of the S&P 500 which averages 13.1%.

If you're a value investor looking for big income, Ship Finance is a company to add to your watch list.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.00 +3.09%
SANCHEZ ENE… SN 34.18 +2.67%
THE PANTRY… PTRY 21.02 +2.09%
INTEL CP INTC 35.15 +1.88%
CLAYTON WIL… CWEI 117.30 +1.78%