Please ensure Javascript is enabled for purposes of website accessibility

Why Dynagas LNG Partners Stock Dropped 29%

By Rich Smith - Updated Apr 23, 2019 at 8:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A dividend cut of 75% was bound to provoke some kind of reaction.

What happened

Shares of liquefied natural gas tanker company Dynagas LNG Partners (NYSE: DLNG) hit a reef on Monday, falling 29.1% as of 12:40 p.m. EST.

Dynagas announced on Friday after close of trading that it is cutting its "quarterly cash distribution" (commonly thought of as a dividend) by 75% to just $0.0625 per unit.

A tanker that has run aground on a reef.

Investors just grounded Dynagas stock. Image source: Getty Images.

So what

After four straight quarters of profitability, Dynagas reported a $0.07-per-share loss last quarter, and with Q4 2018 earnings not that far off, it appears things haven't taken a turn for the better at Dynagas. Company CEO Tony Lauritzen said the distribution cut was necessitated by the need "to retain more ... cash ... to maintain a steady cash balance and to facilitate the refinancing of the Partnership's $250 million notes which mature on October 30, 2019."

Now what

On its face, this seems like a prudent move -- Dynagas deciding to pay its debts and diverting cash that would otherwise go to shareholders for this purpose. But here's where things get a bit dicier.

Dynagas warned that "the level of future cash distributions to common unit holders ... may be further reduced or eliminated by the Board of Directors of the Partnership" based on such factors as "the final terms of the refinancing of the Notes, including the level of indebtedness incurred (if any) or new securities issued (if any) by the Partnership in connection with such refinancing."

So the upshot is this: Dynagas is cutting its dividend -- and may do so again.

No wonder investors are upset.

Check out the latest Dynagas LNG Partners earnings call transcript.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.