Why Income Investors Should Invest in John Fredriksen Companies

An excellent investment strategy is to invest alongside innovators and founders of great companies. In the world of high-yield investing few can compete with the dividend-friendly family of companies of one of the world's greatest entrepreneurs -- John Fredriksen.

May 20, 2014 at 3:39PM

A key investing principle here at the Fool is to find great companies led by innovative and dedicated founders -- then invest alongside them for the long term. Heavy inside ownership is seen as a major benefit and gives us confidence that the interests of investors and management are aligned. The technology sector is famous for innovative, founder-led companies, with the most prevalent examples being Amazon,Tesla, Google, and Netflix. For yield-hungry income investors in the energy space the options seem slimmer, with only Kinder Morgan's empire of companies and MLPs meeting this criteria. However, there is a lesser-known giant of income investing, one whose innovative spirit and entrepreneurial genius rivals any of the above company's founders. This article is designed to introduce investors to one of the world's most successful capitalists and begin a series of articles highlighting his high-yielding, high-quality empire of income stocks, investments that could make long-term investors very wealthy.

John Fredriksen: the modern day Poseidon 
To investors who know of him, John Fredriksen seems like the god of the sea. From his humble roots as the son of a Norwegian welder, Fredriksen has built one of the largest seaborne empires in the world and is today, at a net worth of $14 billion, the 78th richest person in the world.

A truly self-made billionaire, John started off as a shipbroker in Norway, but in his 20's struck out on his own. In the 1960's he began trading oil in Beirut, Lebanon and bought his first oil tankers in the 1970's. During the Iran/Iraq war of the 1980's he was one of the few tanker owners brave enough to continue operating in the region, despite the danger to his ships. Due to the extraordinary profits Fredriksen was able to garner during that decade, in the 1990's he was able to found Frontline LTD, which went on to become the largest oil tanker company in the world. From that high point, he diversified his empire by founding Seadrill, Ship Finance International, Golden Ocean, Golar LNG, Deep Sea Supply, and Marine Harvest

In 2006, Fredriksen gave up Norwegian citizenship in order to become a citizen of Cyprus. This was because Cyprus imposes no taxes on dividends generated outside the country. 

This fact, in addition to his heavy ownership stakes in the companies he's founded (he owns 21% of Seadrill, which pays him $400 million/year in dividends), is why Fredriksen companies are famous for having some of the highest yields on the market. 

  • Seadrill Limited: 11.2%
  • North Atlantic Drilling: 10.6%
  • Ship Finance International: 9.1%
  • Seadrill Partners: 6.7%
  • Golar LNG Partners: 6.7%
  • Marine Harvest: 6.1%
  • Frontline 2012: 5.8% (based on recently announced merger with Knightsbridge Tankers, who recently raised its dividend and is guiding for long-term dividend growth)
  • Golar LNG: 4%

Over a series of articles I will explore all of these companies and partnerships in order to help income investors decide if they want to participate in the fast-growing Fredriksen empire.

Golar LNG (NASDAQ:GLNG) and Golar LNG Partners (NASDAQ:GMLP) are among the best ways to play the coming liquefied natural gas (LNG) shipping boom. This boom will be driven by two of the biggest energy megatrends today: LNG exports and growing gas production, a result of the shale fracking boom. 

Golar LNG serves as a large stakeholder (39.4% owner) and general partner to Golar LNG Partners, and as such receives both distributions from the MLP as well as incentive distribution rights, which have grown by 300% since 2012. These income streams have allowed the company to grow its dividend by 80% (18.2% CAGR) in the last three and a half years. 

Both the security and growth of the dividend/distribution will come in the form of aggressive growth in both regular LNG tankers (10 scheduled for delivery by November 2015) and floating storage and regasification ships (three to be delivered by November 2015). 

The MLP, by its nature has a slightly higher yield and slower distribution growth, though at 11.8% CAGR growth since its 2011 IPO, income investors have done very well by both the parent company and the MLP. The combination of excellent industry fundamentals and company-specific execution is likely to continue resulting in market-beating total returns over the long term.

Foolish takeaway
The John Fredriksen empire of companies represents an opportunity for long-term income investors to invest alongside one of the brightest minds in the world today. This modern-day king of the sea has managed to tap into some of the largest and most profitable megatrends in the global economy -- offshore oil drilling, LNG shipping, growing global food demand -- as well as generalized shipping and energy transportation. In the process he has created one of the best wealth and income generating machines in the world, one income investors would do well to consider for their portfolios. 

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Adam Galas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers