SFL Corporation: An Attractive Dividend Yield Of 9.53% (NYSE:SFL)

Introduction

SFL Company Ltd. (NYSE: NYSE:SFL) launched its fourth quarter 2022 outcomes on February 15, 2023.

Word: This text is an replace of my article printed on November 15, 2022. I’ve adopted SFL’s quarterly Looking for Alpha outcomes since Sept. 2014.

1 – 4Q22 Outcomes Snapshot

SFL Company Ltd. reported a quarterly revenue of $0.36 per diluted share in comparison with $0.63 per share in the identical quarter a 12 months in the past.

It was one other robust quarter for SFL Company Ltd. with a brand new document in revenues. The corporate’s complete U.S. GAAP working revenues on a consolidated foundation had been $197.82 million in 4Q22, in comparison with $152.06 million within the earlier 12 months’s quarter.

Word: This determine is decrease than the money acquired because it excludes revenues from constitution rent, which aren’t recognized as working revenues U.S. GAAP. Extra particulars later on this article. The money revenues acquired in 4Q22 had been $209.62 million.

The corporate elevated its quarterly dividend to $0.24 per share this quarter. The dividend yield is now 9.53%.

Adjusted EBITDA on a consolidated foundation was $135.36 million (together with the 49.9% owned related corporations), up from $121.30 million posted the identical quarter a 12 months in the past.

Based on the press launch:

As of December 31, 2022, and adjusted for subsequent transactions, the estimated fastened price constitution backlog from the Firm’s fleet of 77 wholly or partly owned vessels and new buildings beneath development was roughly $3.6 billion with a weighted remaining constitution time period of 6.6 years.

The backlog is down barely this quarter, however nonetheless at a wholesome stage.

2 – Funding Thesis

I’m a long-term SFL shareholder and have trusted the corporate via good instances and unsure instances. Nonetheless, even in probably the most difficult scenario, administration may preserve a high-level distribution to shareholders.

CEO Ole Hjertaker stated within the press launch:

we’ve got repeatedly demonstrated our capability to each renew and diversify our portfolio of belongings and charters, supporting a sustainable long run distribution capability.»

An excellent benefit for buyers is that SFL isn’t too particular and may adapt quicker than an organization specializing in a smaller area of interest. When a enterprise phase isn’t performing properly, the corporate can shortly shift to a different enterprise and adapt. Now we have seen it enjoying with Seadrill, for instance. Each cloud has a silver lining, and administration has achieved nice.

Versatility is essential within the delivery enterprise and provides the corporate sufficient time to switch its enterprise mannequin whereas maximizing future revenue.

Thus, the funding thesis continues to be the identical as my previous article, and I like to recommend SFL as a long-term funding.

Nonetheless, I recommend buying and selling short-term SFL utilizing a minimum of 30% of your total place to totally revenue from this risky and ever-changing business. This two-level technique has prevailed in my market, “The Gold and Oil Nook,” and I imagine it’s the most rewarding.

3 – Inventory Efficiency

I typically examine SFL to a few different corporations I observe on Looking for Alpha. Teekay Tankers (TNK), Scorpio Tankers (STNG), and Frontline plc (FRO). Nonetheless, this comparability isn’t completely correct as a result of they’re pure Tankers corporations and will not be completely comparable with SFL, which owns a tankers fleet representing 22% of its complete fleet.

This distinction explains why SFL is underperforming the Tankers group, particularly Teekay Tankers and Scorpio Tankers, up 284% and 244%.

SFL inventory is up 19% on a one-year foundation.

SFL Corp.: The Uncooked Numbers: Fourth Quarter Of 2022 And Financials Historical past

Click on to enlarge

Supply: SFL launch.

Evaluation: Revenues, Earnings Particulars, Free Money Move, And Backlog Dialogue

1 – Working revenues had been $197.82 million in 4Q22

1.1 – Revenues and others

SFL Corp. acquired a constitution rent of roughly $209.62 million from the Firm’s vessels and rigs, together with $11.80 million in Acquire on the sale of belongings and termination of charters.

CEO Ole Hjertaker stated within the This autumn press launch:

SFL is happy to announce yet one more robust quarter, with progress in each revenues and EBITDA. All through 2022, we’ve got continued constructing our portfolio via a mix of recent long run charters on current vessels and new acquisitions, growing our fastened price constitution backlog to roughly $3.6 billion.

The corporate had $48.45 million in revenue for the fourth quarter of 2022, or $0.36 per diluted share (estimated).

Adjusted EBITDA was $135.36 million, up 11.6% from final 12 months.

1.2 – Highlights throughout 4Q22 (press launch)

• 76th consecutive quarterly dividend declared, elevated to $0.24 per share Internet revenue of $48.5 million, or $0.38 per share within the fourth quarter
• Acquired constitution rent of roughly $208 million within the quarter, incl. $6.9 million of revenue share
• Adjusted EBITDA2 of $127.5 million from consolidated subsidiaries, plus a further $7.9 million adjusted EBITDA from 49.9% owned related corporations
• 4 new vessels delivered through the fourth quarter, all with long run charters to main bluechip clients
• Agreed sale of a 2009-built Suezmax crude oil tanker with anticipated supply within the first quarter

Word: supply press launch.

1.3 – The quarterly dividend is as much as $0.24 per share in 4Q22, a rise of 4.3% sequentially.

It’s nonetheless a historic low for the corporate, however we see definitive progress on this aspect, with a yield now of 8.85%.

2 – Free money move is a loss estimated at $119.97 million in 4Q22

Trailing 12-month free money move (“ttm”) is a lack of $247.38 million, with a free money move loss estimated at $119.97 million in 4Q22.

The loss in free money move might be defined by the numerous CapEx utilized by the corporate to increase and adapt continually. On this case, the loss isn’t essentially a destructive. CapEx was elevated this quarter at $228.48 million. Nonetheless, free money move has been underwater for 3 of the final 4 quarters, and it begins to be a bit regarding.

3 – Debt evaluation: Internet debt is estimated at $1,890 billion in 4Q22

4 – Phase Evaluation

4.1 – The offshore phase

SFL owns two HE rigs. The semisub West Hercules and the help jack-up West Linus have been chartered to Seadrill since 2008 and 2014.

Throughout the fourth quarter of 2022, SFL acquired a constitution rent of $18.6 million of constitution hires for the rigs. As well as, SFL acquired a $10.5 million cost referring to catch-up funds for beforehand lowered constitution rent from Seadrill throughout Chapter 11. The semi-submersible rig Hercules will bear its scheduled particular periodic survey in 1Q23 and is at the moment being marketed for brand new constitution alternatives from 2Q23 onwards, which shall be a simple process. The price of the SPS is estimated at $50 million.

4.2 – SFL dry bulk phase

The Firm has 15 dry bulk carriers, of which eight had been employed on long-term charters within the quarter.

SFL generated roughly $23.7 million in gross constitution rent from the dry bulk fleet within the fourth quarter, together with a roughly $0.4 million revenue share. The seven vessels employed within the spot and short-term market earned roughly $9.0 million in internet constitution rent through the fourth quarter, in contrast with roughly $10.2 million from six vessels within the earlier quarter.

4.3 – Tankers phase

SFL has a fleet of 18 crude oil, product, and chemical tankers, together with introduced transactions, with the bulk employed on long-term charters. The vessels generated roughly $49 million in gross constitution rent through the quarter.

SFL had two Suezmax tankers and two chemical tankers buying and selling within the spot and short-term constitution market. These vessels earned internet constitution rent of roughly $12.1 million within the fourth quarter, in comparison with roughly $11.5 million within the third quarter.

In 4Q22, the Firm accomplished the acquisition of 4 fashionable Suezmax tankers together with six-year time charters to a subsidiary of Koch Industries, including roughly $250 million to SFL’s fixed-rate constitution backlog.

After the quarter ended, SFL agreed to promote a 2009 constructed Suezmax tanker for a internet gross sales worth of roughly $39 million.

4.4 – Liners phase

SFL has a liner fleet of 36 container vessels, together with introduced transactions and 7 automotive carriers, of which 4 are beneath development.

The liner fleet generated roughly $99 million in gross constitution rent within the quarter. Roughly $6.5 million of the rent was a revenue share from gasoline financial savings.

As of December 31, 2022, the estimated fixed-rate constitution backlog from the wholly and partly owned liner fleet was roughly $2.4 billion, with a median remaining constitution time period of about 4.5 years or 7.3 years if weighted by constitution rent.

Technical Evaluation (Brief Time period) And Commentary

Word: The graph has been adjusted for the dividend.

SFL varieties an ascending channel sample with resistance at $10.75 and help at $9.95.

Ascending channel patterns or rising channels are short-term bullish in {that a} inventory strikes increased inside an ascending channel, however these patterns usually kind inside longer-term downtrends as continuation patterns. The ascending channel sample is usually adopted by decrease costs,

The general technique I usually promote in my market, “The Gold And Oil Nook,” is to maintain a core long-term place and use about 35% to commerce LIFO whereas ready for a better last worth goal or take pleasure in a dividend yield of practically 9.53%.

The buying and selling technique is to promote 35% between $10.65 and $10.80 with increased resistance at $11.25 and look forward to a retracement between $10 and $9.7 with decrease help at $9.25.

Warning: The TA chart should be up to date often to be related. It’s what I’m doing in my inventory tracker. The chart above has a attainable validity of a few week. Keep in mind, the TA chart is a software solely that will help you undertake the fitting technique. It isn’t a option to foresee the long run. Nobody and nothing can.

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