Super-sized oil tanker companies, whose vessels cut through oceans to deliver oil to energy-hungry nations, have made a habit out of paying large dividends to shareholders. In 2005, General Maritime Corporation (GMR) and Nordic American Tanker (NAT) paid huge dividends of $4.86 and $4.21 per share respectively. Investors searching for hefty dividends maybe able find their meal ticket here, but we must remain aware of the external energy-hungry climate and industry factors that are driving these companies forward.

The Environment
Oil demand in developing countries like China has increased consistently over the past 10 years as reported by the Energy Information Administration (EIA). As China's demand for oil continues to grow, its list of suitable suppliers has also expanded to include oil rich nations including Sudan, Nigeria, Venezuela and potentially Canada. Growth in China can also been scene in its fledging auto industry, accented by the entrance of Japanese and U.S. auto manufactures. Herbjorn Hansson, Chairman and CEO of Nordic, notes that, "once you start driving a car you don't go back to riding a bicycle".


The Players
General Maritime Corporation and Nordic American Tanker focus on the mid-size tanker market. Aframax and Suezmax are both considered mid-size tankers since capacity for these tankers tops out at 200,000 dwt (deadweight tons). Modern Aframax ships are capable of supporting up to 180,000 dwt, equal to 800,000 barrels of crude oil. Modern and larger Suezmax ships offer greater protection from oil spills with their double hull design along with the capacity to support 200,000 dwt, equal to 1 million barrels or crude oil. Oil tanker companies can either set their prices on individual contracts or they can enter into agreements based on spot market rates.


Nordic is the largest independent super oil tanker company in the world. Herbjorn Hansson grew Nordic from 3 tankers to 8 tankers in 14 months through acquisitions. Nordic transports oil from West Africa to the Gulf of Mexico and from the Middle East to China utilizing a fleet of 8 Suezmax double hulled tankers. Nordic's 2005 4th quarter Net Income increased 180% over the previous year to $25 million as it participated in the spot market where prices for transporting oil soared up to $64,002 per day during the quarter. For the year, Net Income increased 15% to $46 million. Spot prices for oil transportation can be seen on Imarex, the central exchange for maritime derivatives. The scarcity of tankers also played a roll in helping to drive profits. The Suezmax spot rates averaged $47,269 per day for January 2006. Nordic's stock is currently trading just below $30.

General Maritime's 2005 4th quarter results were not as rosy, as Net Income decreased 34% from the previous year to $104.6 million as a result of lower spot rates and a smaller fleet. On March 1, 2006 General Maritime Corporation announced the addition of a new Suezmax vessel to its fleet along with 3 additional new buildings to follow over the next two years. General Maritime stock is currently trading right around $35.

There are other larger players who merit attention in the energy shipping industry, including Overseas Shipping (OSG) and Frontline LTD (FRO). Overseas Shipping and Frontline LTD operate very large crude carriers (VLCCs) with capacity between 200,000 and 320,000 dwt along with other vessels utilized specifically for product transportation shipments.

Market Capacity

The fundamental principles of supply and demand are at work in the super tanker market. Limited supplies of Suezmax tankers are available while demand in the U.S. and Far East nations is steadily increasing. At the end of 2005 the Suezmax world fleet stood at 324 vessels, with 77 of those being single hulled vessels that will be phased out by 2010. Even with a reported 67 Suezmax vessels on order at the end of 2005, it takes approximately 24 to 36 months before a new tanker can be delivered as shipyards are already working at full capacity.

As Beijing prepares to host the upcoming Olympics in 2008 investors should investigate the shipping companies that stand to benefit from the energy demands of the world. While oil prices are volatile in the short run, the long run trend suggests that energy consumption will continue to drive the demand for Nordic American Tanker and General Maritime transportation services.

Related Articles
  1. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  2. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  3. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  4. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  5. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  6. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  7. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  8. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  9. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  10. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!