Cramer on Friday defended Nordic American Tanker, which added just 7 cents to its share price today after reporting earnings. The company may have announced a bigger loss that Wall Street had expected, but he said he’s sticking with it.
In addition to the good news that Cramer saw coming out of the quarter, such as the company’s expanding fleet, Nordic American also raised its dividend to 25 cents from 10 cents, or 150%. The Mad Money host said he also likes the balance sheet, which is debt free, and the fact that spot rates, or the daily fee that NAT earns for its tankers, are on the rise this quarter. Given all these positives, Cramer said he couldn’t give the stock a thumbs-down, regardless of what Wall Street thinks.
Cramer also tried to explain NAT’s 8% loss since Nov. 23, the last time CEO Herbjørn Hansson appeared on the show. Cramer blamed the decline on Nordic American’s 4 million share shelf offering on Jan. 22, saying that investors don’t like the dilution that takes place when a company floods the market with new shares.
But these people fail to see the virtuous cycle at work here, Cramer said. Nordic American uses the offering money to buy new tankers, which generates more profits that are returned to shareholders in the form of a dividend. As long as the growth in business outweighs the diluted share price, then there’s no problem. And that was the case in this most recent secondary: The 10% dilution falls far below the 22% growth in the company’s fleet as it adds another four vessels.
Nordic American is expected to pay out dividends worth $2.47 a share in 2010 and $2.83 a share in 2011. That’s an implied, and more than respectable, 8.6% or 9.8% yield, respectively, and the revenues are there to pay it. Cramer said he hopes the consensus is right, especially given that NAT is paying only 25 cents a quarter right now.
Cramer is bullish on the stock, though, but the question is whether or not he’s right. Watch his interview with CEO Hansson and decide for yourself.
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