Dynagas LNG Partners (NASDAQ:DLNG) reported earnings late last week for the quarter and year ending 12/31/2018 and I had a chance to briefly look over the report.
Dynagas LNG is an owner of LNG ships for the transportation of liquified natural gas. The company runs a small fleet relative to competing ship owners such as GasLog Partners. DLNG runs a fleet of just 6 ships as compared to the 14 ships owned by GasLog Partners.
Dynagas LNG showed falling revenue in 2018 as compared to 2017 and anytime revenue is falling, these ship owners, which typically carry pretty massive debt, are going to run into trouble. DLNG started 2018 with a common quarterly distribution of 42 1/4 cents/share which was lowered to 25 cents/share and finally slashed to 6 1/4 cents/share–with the severely reduced distribution the company was able to cover the total distributions (common and preferred).
I am happy to observe that if the company can maintain present revenue levels coupled with the reduced distribution they will readily cover the dividends for 2019. Of course this still leaves this company with a large debt load – and they will pay a heavy price for having over $700 million in debt when the company has an annual run rate of revenue of just $130 million. The company has about $250 million in debt coming due this year.
It is noted that on 12/31/2018 the company had over $100 million in cash on the balance sheet and with the greatly reduced distribution the company will likely be ok in 2019.
DLNG has 2 preferred stock issues outstanding which have taken a pounding in the last couple of months. DLNG-A which carries a 9% coupon is trading at about $19.63 with a current yield of 11.46%. DLNG-B, which is a floating rate issue carrying a current 8.75% coupon is trading with a current yield of 11.56%
Investors with a high risk tolerance can look at the above – personally I will pass on issues with this level of risk.