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Broken Market: 44% Cash Yield With A Strong Balance Sheet


DHT Holdings is a shipping company focused on crude tankers, primarily in the VLCC segment.

DHT its Q1-16 earnings on 2 May, producing record results and boosting its dividends to a 17% yield.

The 17% yield is actually far below the internal cash generation due to its conservative payout strategy (roughly 60% of EPS). "Cash yield" is a shocking 44%!

DHT has a strong balance sheet, lucrative time-charters, and an expanding VLCC fleet with three more fully-financed vessels due for delivery during 2016.

This report contains commentary on Q1-16 earnings as well as an investment overview for those who are less familiar. Long DHT with a target range of $10-15.

Note: Familiar readers can skip the overview and jump straight to the earnings commentary, and the remaining analytics. This report reflects my opinion as a researcher and shareholder and is NOT a direct investment advice.


DHT Holdings (NYSE:DHT) is a shipping holding company specializing in VLCC vessels with a mixture of spot and time-charter exposure. DHT (then called "Double Hull Tankers") first went public in October 2005 as a spin-off from now-bankrupt OSG Shipholding. DHT hit severe financial struggles in 2012 and diluted heavily with a backstopped equity offering. DHT received a $110M institutional private placement, followed by a 30.3M share offering for $7.50 in February 2014. DHT sold 23M shares at $6.50 to fund the Samco acquisition in September 2014.

My most recent public analysis on DHT was published in February 2016 when DHT was in the mid-$5s. DHT currently sits at $5.77 and has 114M fully-diluted shares outstanding. Since the convertible senior notes have a strike of $7.28, which is currently anti-dilutive, there are currently just 93.4M basic shares outstanding for a total market capitalization of roughly $539M. My current target for DHT is $10, but with strong spot market performance and strategic repurchases, DHT could have total upside potential to $15+.

DHT reported its Q1-16 earnings on Wednesday afternoon. The following report provides an overview of this firm and discusses the latest earnings report and repurchase program. Value Investor's Edge members received an exclusive preview to the Q1-16 earnings, which projected the strong results including micro events like the Suezmax sale.

Cash Yield Vs. Dividend Yield

Following yesterday's dividend announcement of $0.25/qtr., DHT now has a 17% annualized yield. However, this drastically understates the true internal "cash" yield. This is because DHT's dividend is only based on 60% of earnings. Additionally, earnings are hampered even more by non-cash depreciation charges.

In total, if DHT paid out 100% of (normalized) EPS, the payout would have been $0.42/qtr. for an eye-popping 29% yield. If you focus instead on the internal cash flow generation, which backs out all the non-cash charges like depreciation and amortization, then DHT pulled in $59M during Q1-16, which even included some unfavorable...