Source:  Diana Shipping.

I'm sitting here scratching my head trying to figure it out. Did some change in the industry suddenly spook Diana Shipping (NYSE:DSX)? In its earnings release and conference call on May 14, the company seemed confident about the outlook for the dry shipping industry for the next 18 months and then over the very long term. Just nine short days later, that outlook seemed to have changed.

Share repurchase plan
Those who follow my articles know that I'm a huge fan of share repurchases. Nothing screams confidence louder than a company using its precious resources to buy back its own stock. So you think I would have been excited by Diana Shipping's May 23 announcement that the board of directors had authorized a share repurchase plan for up to $100 million in stock.

I'm not. I'm confused. Diana Shipping executives have said time and time again that they would not return any capital to shareholders for the foreseeable future. The plan has always been for the company to keep investing in itself unless the industry is about to turn sour.  

The November call
In the earnings conference call near the end of 2013, Diana Shipping President Anastasios C. Margaronis said the company would return to dividends when "dry bulk shipping moves to the upper part of the shipping cycle." In other words, it would return capital to shareholders only when shipping rates have peaked.

CFO Andreas Michalopoulos added that the expected growth of the company would decrease in this part of the shipping cycle: "In other words we still feel that we have better use of the money ourselves by buying vessels, the way we do." Apparently the stance now is that investing in vessels isn't the way to go. Are we at peak shipping rates already? Given the low rates lately in dry shipping, I certainly hope not.

The February call
The February earnings conference call offered more of the same theme about how the company would use its money. This time CEO Simeon Palios was the first to shoot down the idea of a dividend or "decreasing our equity." That's a fancy way of saying stock buyback. He added that such a move wouldn't happen until buying more assets didn't make sense based on a negative outlook for shipping rates.

Executive Vice President Ioannis Zafirakis said something interesting during the call: "There are lot of other secret parts that based on experience will make us think that we have ended at the upper part of the cycle." Secret parts? It sounds like internally generated information that gives Diana Shipping a heads up before the general public. Zafirakis added, "We have proven in the past that we know very well where we stand at the cycle at any moment." That's kind of spooky. Did the cycle outlook suddenly shift south in a "moment"?

The May call
Now here is where it gets really bizarre. Less than two months ago Zafirakis repeated that a dividend would only be considered during a "nongrowth phase for the company." He then became almost defensive: "As we have repeatedly said -- we expect to deploy the capital slowly in the next year and half." Sounds like no dividend or buyback for at least 18 months.

He then added, "We have been very, very clear on that." Yet the company announced a stock buyback just nine days later. Sorry, Zafirakis, but Diana Shipping's stance just went from "very, very clear" to foggy. What gives? Was it pressure from the board of directors? Or did the market suddenly shift negatively based on your "secret parts" information?

I obviously don't have the answer, or the secret parts wouldn't be a secret. Foolish investors should tread cautiously and at the very least be on the lookout for a possible unexpected turn for the worse. Hopefully the company will offer clarification with its next conference call, if not sooner.

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Nickey Friedman 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.