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POWR Income Stock of the Week: Torm PLC (TRMD)

Oil markets trade on a variety of factors including geopolitical pressures, government regulation, and country specific output. That’s not to mention simple supply and demand. The best time to look at oil related stocks is in the lower end of a range or cycle, because you know eventually oil will move back to the high end of the range or cycle, as it always has. One stock with a potent dividend that deserves a look at this spot in the range is Torm PLC.

Oil markets have been on a bit of a rollercoaster this year. The expectation going into 2023 was that oil would be fairly range bound, with the majority of its time spent in the upper part of the range. And while it has dropped in price recently, that drop is from a September/October price spike, and it has just fallen back into the lower end of this year’s range. 

As they say, the cure for high oil prices is high oil prices, and vice versa. I don’t expect oil to fall a lot further, even if we have a mild recession in the U.S. And I think the lower end of its range is a great place to look for oil and oil related stocks. Which brings me to a high dividend payer in the oil and chemical shipping business, Torm PLC (TRMD).

With over 80 vessels in all of the large capacity classes, Torm operates tankers for transporting refined oil products and other chemicals. They move oil from refineries to end customers. They were founded in 1889 by Captain Ditlev E. Torm, and have grown from a one ship company to become one of the largest owners of ocean going transports. The company also produces green marine equipment.

Post pandemic demand for oil has now reached pre-Covid levels, and the changing geopolitical landscape has put a strain on the tanker market. Even a small increase in demand at this point can have a large impact on day rates for tankers. 

Here’s a great example of just one geopolitical impact on the tanker market. Prior to the Russian invasion of Ukraine, and the subsequent sanctions on Russian oil, approximately 60% of EU oil imports were delivered via short haul routes. Post sanctions, 80% of EU oil imports are delivered via long haul routes. This has had a huge impact on supporting large tanker day rates. 

Torm’s stock, as I mentioned above, trades in concert with oil and a pull back in price from the mid-$30s last month to the mid-$20s has resulted in a massive dividend yield of 22%. Importantly, the company appears to have the free cash flow to support the continuation of this dividend, or something very close to it. 

The stock now trades at a very low 3.4x current earnings and at only 3.6x projected earnings. Torm also has strong margins, operating margins are over 41%, and a significant amount of insider ownership. 

Torm is a B rated stock in our POWR Ratings. Its highest scores are in the Momentum component, where it sports an 86.67. And, in Sentiment, where it ranks above close to 91% of the companies we track. 

I believe the recent pull back in oil is providing a great opportunity to scan for stocks like Torm, with high dividends and the business operations to support them even with oil in the low end of its range.  

What To Do Next?

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TRMD shares were trading at $26.50 per share on Tuesday afternoon, down $0.57 (-2.11%). Year-to-date, TRMD has gained 7.56%, versus a 22.51% rise in the benchmark S&P 500 index during the same period.

About the Author: Jay Soloff

Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.


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