The Board of Frontline Ltd. (the “Company” or “Frontline”) announces that it has agreed to acquire the VLCC “Front Vista” (the “Vessel”) from Ship Finance International Limited at a purchase price of USD 58.5 mill.

Frontline has furthermore agreed to sell the Vessel and the Buyer will settle the purchase price through the payment of instalments over a 10 year period. The Buyer has secured a 10 year time charter with a State owned oil company at a gross rate of USD 43,500 per day during the entire charter period.

The transaction reflects the Company’s goal of securing long term coverage for parts of its fleet.

I am not certain who is collecting the $43k per day: Frontline or the buyer? Hope Ship Finance made out OK as I own stock in SFL.

OK, just got the email from Ship Finance, here is a exerpt:

Ship Finance will receive net proceeds of approximately $22.1 million after prepayment of associated debt. The sale is expected to result in a book gain on sale of assets of approximately $1.8 million.

Here are the payors 11 through 15 on my list. The stocks are listed in this order: Company and stock symbol, dividend earned on $1000 invested on 1/1/2009 (divide by 5 to get an annualized percentage) and the share price change since the beginning of the year.

• Nordic American Tanker NAT, $52.50, -1.7%
• Ship Finance Ltd.SFL, $54.00, +10.8%
• Horizon Lines, Inc. $62.92, +44.7%
• Seaspan Corp., $64.40, -20.7%
• TORM AS TRMD, $66.68, +4.0%

This group is almost all tankers and containers. Horizon and Seaspan are in the container business. Nordic American and TORM are primarily tanker companies and Ship Finance is tankers, containers and offshore.

TORM has a policy of a single annual dividend though they have paid out mid-year distributions on occasion.

The divergence of the Y-T-D returns for the two container companies is interesting. Horizon primarily a domestic flagged company and is dependent on the health of the U.S. economy. A leading indicator? Seaspan has a lot of ships on order, but seem to have contracts in place for them as they are delivered.

I own personal positions in NAT and SFL.

I’ve been following your blog for some time and want to tell you that I find it very interesting-as a matter of fact, I look forward to it.

I have two questions for you. First,if you would invest in one shipping stock,taking into account amount of dividend ,safety of dividend and potential growth of the company,which one would it be? Second could you keep a running ‘personal portfolio’ on your blog,so that followers could keep up with your favorite picks? Keep it up.

I thought the answers to these questions would be interesting to the readers of this blog. First, a listing of shipping stocks that I currently personally own.

• Ship Finance International: I have owned SFL for quite a while. Originally it was an exposure to Frontline with less volatility. Now it is exposure to container and offshore drilling as well.
• Nordic American Tanker NAT: I think NAT is the easy choice for exposure to the spot tanker sector. Just look at the distributions over the last 10 years. No debt, low overhead.
• Navios Maritime Partners L.P. NMM I picked this stock up recently for exposure to dry bulk and what appears to be a steady dividend for the next few years.

I think the investor interested in shipping stocks should think about exposure to the different sectors: dry bulk, tanker and container. (I really do not follow offshore here). Then do you want more time charter or spot charter exposure? It is a balancing act. Right now I am most interested in companies that I can get a handle on their possible revenues for the next couple of years and control of their debt levels.

One best shipping stock? A year ago I would have said Ship Finance, and I have taken a bath on the share values. Overseas Shipping Group has tremendous cash flow and growth potential. Right now I think Eagle Bulk Shipping is the best positioned of the suspended dividend/bulk shipping crowd.

These are strictly my opinions and not recommendations. I keep an eye on 42 shipping stocks of which 25 are currently paying some sort of dividend. The shipping sector has gone through a major upheaval over the last year and the future is dependent on the global economic condition. I think the shipping sector has tremendous potential over the next couple of years and the challenge now is to find the companies that will thrive in the new economic environment.

Ship Finance International SFL has declared a second consecutive 30¢ dividend where shareholders can elect to receive cash or additional shares of stock. I am not a big fan of the dilution from issuing stock, but at current share prices and assuming the same level of participation this quarter the amount is about 1.5% of market cap. I anti-diluted myself by spending my cash dividend in advance and picking up a few shares today.

For this quarter’s presentation slide show, SFL breaks out free cash flow. This is after expenses, interest and loan amortization. The net free cash flow for the first quarter was 73¢ per share, nicely covering the dividend. A comparable number was not made available for the Q4 presentation, but comparing EBIDTA for the 2 quarters, the first quarter of 2009 was a 20¢ per share improvement over Q4, 2008.

Also noted in the press release is that SFL delayed the purchase of 5 newbuild container ships for up to 18 months, pushing the delivery dates into 2011 and 2012.

I like Ship Finance as a long term, conservative exposure to shipping. Right now you can collect a 12% dividend while waiting for Board of Directors to start ratcheting up the payout again. One negative may be the amount of profit share received from Frontline over the next several quarters. Profit share has been at about 20¢ per share for the past 2 quarters, compared to a historical average of 30¢. The current very low VLCC spot rates may further reduce or stop the profit share until tanker spot rates improve.

I’m sure you know, but just in case: FRO has slashed their dividend, along with SFL.

We’d like to know which shipping companies are best equipped to weather the storm, and which ones might move rapidly upwards one a hole forms in the storm clouds.

Thanks for putting your thoughts out there and have a great one Tim!

Good comment and I will respond. First, yesterday’s list was the one I have of shipping companies that have completely suspended their payouts. I know there are some others that have made drastic reductions, but are still paying something. At least for the most recent quarter!

Ship Finance SFL is a stock I how personally and they cut their dividend in half, from 60¢ to 30¢. They also allowed shareholders to elect to take additional shares instead of cash. The data: 55% of shares elected to take additional shares, increasing the float by 2.1 million to 74.8 million. My research shows that SFL has plenty of cash flow to start increasing the dividend again and I hope they do so now that the stock price has started to recover.

Frontline FRO and also Nordic American Tanker NAT fall into a different category. Both of these companies contract their tankers primarily on the spot market and pay quarterly dividends on what the ships have earned for the previous quarter. So, a lower dividend is not a slashing, they just made less money during the quarter. That said, Frontline is sitting on a pile of debt that needs servicing and Nordic American Tanker is debt free. I find NAT to be a more comfortable holding when spot tanker rates are in the “tank” as they currently are. I think NAT will have a lower dividend when they announce next week and I have been considering selling my position and buy back if/when the price falls. However, I am still sitting tight on my shares. They have not given an indication like they usually do on where the dividend will fall, so I am hoping for a positive surprise: Anything over 50¢ a share.