Tsakos Energy Navigation: The 7% YTC On Preferred Stock Remains Attractive

seekingalpha09-28

Tsakos Energy Navigation's strong financial performance and well-covered preferred dividends make both common and preferred shares appealing investments.The company's asset recycling program and new ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTsakos Energy Navigation: The 7% YTC On Preferred Stock Remains Attractive\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-28 22:40 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4723832-tsakos-energy-navigation-the-7-percent-ytc-on-preferred-stock-remains-attractive><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Tsakos Energy Navigation's strong financial performance and well-covered preferred dividends make both common and preferred shares appealing investments.The company's asset recycling program and new ...</p>\n\n<a href=\"https://seekingalpha.com/article/4723832-tsakos-energy-navigation-the-7-percent-ytc-on-preferred-stock-remains-attractive\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4144","symbol_name":"石油与天然气的储存和运输","start_time":0,"source_url":"https://seekingalpha.com/article/4723832-tsakos-energy-navigation-the-7-percent-ytc-on-preferred-stock-remains-attractive","article_id":"2471954026","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2159060646/image_2159060646.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2471954026","pubTimestamp":1727534400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Tsakos Energy Navigation's strong financial performance and well-covered preferred dividends make both common and preferred shares appealing investments.The company's asset recycling program and new v","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4144":"石油与天然气的储存和运输","TEN":"Tsakos Energy Navigation Ltd","BK4124":"机动车零配件与设备"},"translate_title":"Tsakos Energy Navigation：优先股7%的YTC仍然具有吸引力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TEN":0.9},"content_text":"Tsakos Energy Navigation's strong financial performance and well-covered preferred dividends make both common and preferred shares appealing investments.The company's asset recycling program and new vessel deliveries enhance its financial stability and growth prospects.With a 7% yield to call, the Series F preferred shares remain an attractive investment, despite potential future rate adjustments.Tsakos' robust balance sheet and improved access to funding bolster confidence in its ability to maintain preferred dividend payments.   bfk92/iStock via Getty Images Introduction Tsakos Energy Navigation (NYSE:TEN) currently operates a fleet of 62 vessels with an additional 12 vessels under construction. I was originally attracted to the company due to its exposure to Suezmax and Aframax vessels, and I have held a long position in the company’s preferred stock for several years now. Tsakos’ financial performance has been much stronger than I had anticipated and I missed out on the majority of the good performance of its common share price, but I wanted the additional layer of safety provided by the preferred shares. Data by YChartsI like the company’s asset recycling program as Tsakos is able to lock in a gain on the sale of older vessels while it continues to build new vessels. Between now and the end of next year, four new vessels will be delivered while the total newbuild order book for Tsakos stands at 12, of which four already have been contracted to a charterer. The preferred dividends remain well covered Looking at the company’s financial performance from the perspective of a preferred share investor, I'm very satisfied with its financial performance, which even makes the common shares pretty appealing. In the second quarter of this year, Tsakos Energy Navigation reported total revenue of just over $214M which is slightly lower than in the second quarter of last year, while underlying expenses increased. Although the income statement below shows the total amount of expenses decreased from almost $139M a year ago to $111.1M in the second quarter of this year, it’s important to understand the $32.5M gain on the sale of vessels was deducted from the Q2 2024 operating expenses.   TEN Investor RelationsThis resulted in an operating income of just under $103M for the second quarter of the year, and about $179M in the entire first semester. The interest expenses are increasing and in the second quarter, Tsakos Energy Navigation reported a net interest expense of $25.4M, an uptick compared to the $20.2M in the second quarter of last year. The net profit attributable to Tsakos was approximately $76.4M and after covering the $6.75M in preferred dividend payments, the net income attributable to the common shareholders of Tsakos was approximately $69.4M for an EPS of $2.36. Looking at the results in the entire first semester, the net profit was $117M or $3.96 after taking the preferred dividend payments into account. Keep in mind that about 37% of the pre-dividend net profit was caused by the gain on the sale of vessels. The company has announced it will pay a semi-annual dividend of $0.90 per share which, in combination with the $0.60 per share it already paid in June, brings the year-to-date dividends to $1.50 per share in the current calendar year. From the perspective of a preferred stock investor, the preferred dividends are well covered. In the first semester, the payout ratio was just over 10% and even if you’d completely ignore the gain on the sale of vessels, the underlying profit of approximately $82M still represents a required payout ratio of less than 20%. So I’m definitely not concerned from the perspective of a preferred shareholder. Looking at the (simplified) balance sheet, Tsakos had a total of $1.75B in equity on the $3.77B balance sheet. And with almost half a billion dollars in cash, the net debt and financial liabilities stand at just over $1.3B vs. the almost $3.1B book value of the vessels and advances paid for vessels under construction.   TEN Investor RelationsThis means the LTV ratio is just over 40%, and that’s based on the book value of the vessels, while the market value is likely higher considering Tsakos has been able to sell some of its vessels at a valuation higher than the book value. I was looking for an exit for the Series F preferred shares I currently own the Series F preferred shares, which are trading with (NYSE:TEN.PR.F) as the ticker symbol. This series of preferred equity is currently trading at $27.08. This series of preferred shares currently have a 9.5% preferred dividend which will become a floating dividend after July 2028 based on the three-month LIBOR +6.54%. This will undoubtedly be updated to the SOFR benchmark rate as it is the most likely reference rate but I can't recall seeing official confirmation on this from Tsakos (I may have missed it, but it’s only important from 2028 on anyway).   Seeking AlphaBased on the current share price and the three years and 10 months until the call date, the yield to call is currently approximately 7%. I was initially thinking I should take the capital gain off the table, but the 7% YTC still makes this an interesting security.  Investment thesis I’m not worried at all about Tsakos Energy Navigation’s ability to cover the preferred dividend payments. In fact, the company’s underlying performance is so strong that even the common stock remains appealing at the current share price. I currently have no position in Tsakos’ common shares, but I still have a long position in the Series F preferred shares. As interest rates on the financial markets are coming down again and considering the company’s balance sheet has gotten safer, I'm quite confident Tsakos now has better access to funding than before and I’m not quite sure it will keep the relatively expensive preferred equity outstanding after the first call date in July 2028.  That’s why I think the preferred equity still is a \"buy\" at this time, even from a \"yield to call\" perspective considering the total yield to call is approximately 7% which represents a 350 bps mark-up to the US five-year treasury yield. Of course it is entirely possible the preferred shares will remain outstanding after the call date and the mark-up of in excess of 600 bps and in that case it could potentially be an interesting vehicle to gain exposure to short-term interest rates.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2471954026"}