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Nordic American Offshore: Dividends With Benefits

Summary

The dividend is currently yielding approximately 10%.

The book value is over two times the current market value.

Nordic American Tankers is a major equity holder.

Background

Nordic American Offshore (NYSE:NAO) owns and operates platform supply vessels (PSVs) in the North Sea. At the time of this analysis, the company operated a fleet of eight PSVs with two more under construction for delivery in April and June 2016.

As of this writing, NAO's stock price was $4.66 -- above its 52 week low of $3.23 with a negative current P/E, a negative forward P/E, a market capitalization of $105.13 million, and a forward dividend yield of 9.74%.

This analysis is based on information from NAO public SEC filings and press releases from the period 1Q14 through 4Q15.

Blue Protector - www.nao.bm

History

Nordic American Tankers (NYSE:NAT) established NAO in November 2013 with the intention of capitalizing on the fragmented PSV market through a private placement of 16.7 million shares at $15.00 a share on the Norwegian OTC exchange. NAT purchased 4.3 million of these shares to support NAO and to capitalize on expected dividend payments from NAO. Proceeds from this placement funded NAO's purchase of eight PSVs with an additional two to be delivered in April and June 2016.

At the time of the private placement, NAT was the largest shareholder in NAO with 26 % of the outstanding shares.

In June 2014 NAO completed an IPO on the NYSE and subsequently transferred the shares from the Norwegian OTC to the NYSE.

Compelling Fundamentals

Current Dividend Yield of 9.74%

Even after a recent dividend cut, the dividend is still yielding close to 10%. The company has paid a consistent dividend since the IPO. The table below details the dividend history to date.

In addition, the company is focused on maintaining this dividend as noted by Executive Chairman Herbjørn Hansson in the Feb 4, 2016 press release:

The main elements on which NAO's strategy is based, are the same fundamentals as those of Nordic American Tankers Limited, including quarterly dividends, low debt, low G&A costs, high liquidity in the stock and full transparency.

We believe that our dividend policy will continue to enable us to achieve a competitively priced risk adjusted cash yield and a positive total return over time...


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