A Plunging Dividend Takes Nordic American Tanker Ltd. Down With It

What happened

Shares of Nordic American Tanker (NYSE: NAT) plunged on Thursday, falling more than 10% at 2:45 p.m. EDT. Driving the sell-off was the declaration of the company's latest dividend.

So what

Nordic American Tanker set its dividend for the third quarter at $0.03 per share. While that marked its 81st consecutive quarterly distribution, it's also the lowest level since Nordic American Tanker started returning cash to investors 20 years ago. Furthermore, it's down significantly from last quarter, when the tanker company paid out $0.15 per share, which included $0.10 in cash and a distribution of shares of its offshore supply vessel subsidiary equivalent to $0.05. Meanwhile, its first two dividends this year were for $0.20 per share.

Nordic American Tanker's dividend tends to fluctuate from quarter to quarter because it pays a variable one based on its operating cash flow from the previous quarter. When cash flow rises, so does the dividend. However, when industry conditions grow turbulent, which was the case in the third quarter, the payout tends to fall.

Now what

Nordic American Tanker believes that the third quarter will be the low-water mark for its results, with the company noting that "at the beginning of the 4th quarter, there appears to be an upswing in the tanker market." As a result, the dividend should rise next quarter. That said, this isn't an income stock for the faint of heart, which is why dividend seekers should look elsewhere for a steady payout.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.