Buy Recommendation: Nordic American Tanker Ltd.

Today I am recommending a new 30 Day Dividends position in Nordic American Tanker Ltd (NYSE:NAT).

Nordic American is a crude oil shipping company that owns 30 Suezmax tankers. The company has been an NYSE listed stock since 1997 and has paid dividends since 2001.

Nordic American carries basically no debt and has a policy of paying out most of its free cash flow as variable quarterly dividends. Historically, the dividend amounts have varied greatly, depending on the spot lease rate for Suezmax tankers. As a result the NAT share price goes through large swings as the dividend payments change.

NAT just went ex-dividend on a $0.25 per share dividend after three quarters of payments of around $0.40 per share. What’s different for this quarter is that Nordic American generated enough profit to pay a much larger dividend, but the company chose to use the cash to pay for and to add a couple of ships to the fleet. As usual, the market does not understand the financial workings and the NAT share price has dropped below $12, compared to above $14 before the dividend was announced. The new ships will add to NAT’s dividend paying ability.

For the next quarter, there is a good probability that a dividend of $0.40 to $0.50 will be declared. If that happens, the NAT share price will go back above $14. That represents an 18% to 20% gain from the current share value. I will set a target price that is 15% above today’s closing share price.

NAT is an IRS form 1099 reporting stock.

Recommendation: Buy NAT up to $12.25.

Target price will be 15% above the August 16th close. I expect to hit the target before the next ex-dividend date.