If you live by the sword, chances are pretty good that you will die by the sword.

Nordic American Tanker (NYSE:NAT), an operator of seven (and soon to be eight) Suezmax-class tankers, knows this lesson quite well. This shipping company operates its vessels almost entirely on spot market engagements -- a strategy that can produce substantial rewards when rates rise but can also backfire in times of declining rates.

During the third quarter of this year, shipping rates were not especially strong. In fact, the average spot rate for Suezmax ships during the quarter (as reported by Imarex, a freight derivative exchange) was all of $24,677 -- well below the $32,654 average seen in the second quarter of this year and also well below the year-ago level of $55,742 per day.

As you might imagine, then, Nordic American's financial performance was not quite as robust as it has been. Net voyage revenue was down 20% from the prior quarter (though up 11% annually), and net income was down more than half on both a sequential and annual comparison. As a result, the dividend for the quarter will be $0.60 per share -- the lowest level in almost two full years.

On a more positive note, rates are picking up. As I suggested might be the case after Hurricane Katrina hit, tanker rates picked up in September and the Imarex Suezmax spot rate on Oct. 7 was reportedly $53,033. Seasonally higher rates, coupled with the fact that Nordic American will be bringing a newly acquired tanker into service in November, should make for a better fourth quarter. Then again, spot rates can be fickle and volatile, so we won't know until we know.

There is no shortage of tanker plays in the market, ranging from large players like TeekayShipping (NYSE:TK) and Frontline (NYSE:FRO) to smaller operators such as ExcelMaritime (NYSE:EXM) and plenty of in-betweens like OMI (NYSE:OMM) and TsakosEnergy (NYSE:TNP). Some pay high dividends; some don't. Some operate primarily in the spot market, while others prefer charters. Some operate a range of vessels; others specialize in just one or two classes. For investors who can accept the sometimes-exceptional volatility that goes with shipping rates, these can be interesting dividend or capital-gains plays. But investors must do their due diligence and understand what they're buying, lest they find themselves going up a certain creek in a canoe with no paddles.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).