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Ship Finance International: Q4 Results Show Strength


  • Ship Finance announced solid results for the fourth quarter 2017, despite some weaknesses in the shipping and offshore drilling industry.
  • The company benefited from a recovery in the dry bulk shipping industry, receiving $162,000 in profit sharing revenues.
  • Seadrill now has a solid restructuring plan that should have minimal impact on Ship Finance long-term and this plan was already priced into the stock.
  • The company's payout ratio is quite high, but it is generating sufficient cash to cover its dividend so it is arguably sustainable.
  • Ship Finance has one of the best dividend yields in the market and appears to be rather underappreciated.

On Tuesday, February 27, 2018, Bermudan shipowner Ship Finance International (NYSE:SFL) announced its fourth quarter 2017 earnings results. Overall, these results were surprisingly good, particularly when we consider the relatively weak markets in both shipping and offshore drilling. However, Ship Finance does not directly participate in either industry; rather, it owns ships and drilling rigs and leases them to companies that do. In this regard, it is a finance company and not a shipping firm. The company also has a long history of rewarding its shareholders generously, a tradition that it continues in the fourth quarter of 2017.

As my long-time readers are no doubt well aware, it is my usual practice to share the highlights from a company's earnings report before delving into an analysis of those results. This is because these highlights serve to provide background for the remainder of the article as well as provide a framework for the resultant analysis. Therefore, here are the highlights from Ship Finance's fourth quarter 2017 earnings results:

  • Ship Finance reported total operating revenues of $96.102 million in the fourth quarter of 2017. This compares favorably to the $93.673 million that the company brought in during the previous quarter.
  • The company had total operating expenses of $57.461 million in the fourth quarter, representing a slight increase over the $56.435 million that it had in the third.
  • One of Ship Finance's largest customers, offshore drilling giant Seadrill Limited (SDRL), announced a global settlement in its Chapter 11 cases following the close of the quarter. There were no significant changes to terms affecting Ship Finance from the initial RSA.
  • Ship Finance received its first profit share income from eight Capesize dry bulk carriers on long-term charters. This point to improving market conditions for this portion of the fleet.
  • The company reported total net

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