Cramer Bullish On Nordic American Tanker (NAT)
When Nordic American Tanker (NYSE: NAT) was trounced by investors on Friday for posting higher-than-expected losses for its latest quarter, Cramer stuck to the stock saying that the good thing that has come out of the quarter was its dividend. NAT has raised its dividend by 150% from $0.10 to $0.25. Cramer also said that he liked NAT’s debt-free balance sheet and the rising spot rates, or the daily fee that NAT earns for its tankers. Cramer believes that these positives alone more than make up for the higher-than-expected losses.
Cramer explained that an 8% decline in NAT’s share price since November 23, when the company’s CEO Herbjørn Hansson appeared on the Mad Money show, was primarily due to Nordic American Tanker’s 4 million share shelf offering on January 22. Cramer said that investors dislike the dilution caused by such offerings but fail to appreciate that the funds generated from such offerings are used by the company to buy new tankers that would generate higher earnings.
According to Cramer, offerings should not cause a problem as long as the growth in business outweighs the diluted share price. This is what the case is supposed to be in NAT’s most recent secondary offering where 10% dilution falls far below the 22% growth in the company’s fleet.
Wall Street is expecting Nordic American Tanker to pay out dividends worth $2.47 a share in 2010 and $2.83 a share in 2011, implying an impressive yield of 8.6% and 9.8%, respectively. Cramer says NAT is generating enough revenues to pay it.
