TORMNASDAQ: TRMD

TORM PLC, a tanker company majority owned by Brookfield's Oaktree Wealth Management, has a turbulent past but is now supported by two reputable financial services firms. With a $1.50 dividend, the stock offers a potential 16% forward yield if the dividend remains unchanged.

TORM plc's stock has increased by 62.64% since I recommended it as a "Buy" in July 2023. It is still undervalued and strategically positioned, in my opinion. The product tanker market is projected to see a rise in demand and a decrease in supply, creating advantageous conditions for sustaining high rates. TORM's financial standing and dividend coverage are expected to remain robust for at least the next two years.

TRMD has a large fleet of 93 ships, including 20 LR2 vessels, and has a conservative balance sheet with strong liquidity. Catalysts for the tanker market include declining diesel inventories, growing refinery dislocation, and the Red Sea crisis. The company's liquidity position is bulletproof with $240 million cash, $724 million operating earnings, and $857 million operating cash flow.

TORM plc is one of the world's largest transporters of refined oil products, operating in various vessel segments from Medium Range to Long Range 2 tankers. In 9M 2023, TORM achieved historically high financial results, despite a temporary decline in freight rates during the summer. I think it's good that TORM is trying to optimize its fleet in advance and rejuvenate its average age.

TORM's 20% dividend has moderate levels of coverage and justifies ownership despite near-term risks. Global realignment of trade flows has increased international demand for shipping of refined products, driving up ton-miles and charter rates. Refining capacity closures in developed countries have created a need for imports, increasing shipping demand.

TORM is one of the highest-quality names available in the product tanker space, with an excellent track record of capital allocation and generous shareholder returns. If the current product tanker earnings can be sustained, the forward dividend yield is around 20%. The fundamentals of the tanker market are expected to remain strong over the next 2-3 years because of constrained supply.

Shipping vessel rates remain high due to rising energy prices and major displacement, benefiting companies like TORM plc. TORM looks very undervalued vs its industry. TORM has experienced significant growth, with record earnings and cash flow in 2022 and continued growth in 2023, leading to very generous dividends.

TORM plc is one of the world's largest transporters of refined oil products, operating in various vessel segments from Medium Range to Long Range 2 tankers. TORM's balance sheet remains strong, with a net LTV ratio of 29% and available liquidity of $497 million. The financial performance in Q2 was the best in the firm's history. TORM expects significant earnings day coverage at favorable rates for the remainder of FY2023, with already secured 72% of its full-year earning days.

My Buy rating on TRMD has met my expectations, but its upward momentum has stalled at a pivotal level. The company's revised earnings outlook suggests a lower second-half projection due to uncertain macroeconomic conditions. Despite caution, I assessed that the threat of a steep dividend cut appears to be relatively low for now, keeping income investors on board.