Dynagas LNG Partners: Potential for Another Dividend Hike

Dynagas LNG Partners may increase its dividend payout due to its reduced debt levels. The company has been steadily paying down its debt, which has improved its financial position. A potential dividend hike could boost the company's units.

Dynagas LNG Partners (NYSE: DLNG) has shown significant progress in its debt reduction efforts, which could potentially lead to an increase in its dividend payout. The company has been steadily paying down its debt, improving its financial position and potentially setting the stage for a dividend hike.

In late November 2022, Dynagas reinstated its common quarterly cash distribution at $0.049 per unit and authorized a $10 million unit repurchase program. While the initial rally in the stock price following this announcement was significant, the units have since hovered around $3.75. However, the company's management has continued to execute, further improving the balance sheet.

The company's fleet has remained fully booked, with utilization rates around 99–100%. Charterers include SEFE, Equinor, Yamal Trade, and NextDecade, ensuring steady cash flows. Despite the expiration of its interest-rate swap in September 2024, Dynagas has managed to keep net interest and finance costs at $5.2 million in the second quarter of 2025.

A significant structural change has been the full redemption of the 8.75% Series B preferred units. The redemption, which was completed in July 2025, eliminated a substantial portion of the preferred distributions, saving approximately $5.4 million annually. This cash can now be redirected to common unitholders or debt service.

Dynagas' operating cash flow (OCF) has been robust, with $92.2 million reported in 2024 and $24.3 million in the second quarter of 2025 alone. Given this strong cash flow, a potential dividend hike appears feasible. Assuming a common payout increase to $0.10 per quarter ($0.40/year), the annual cash outlay would be approximately $14.6 million, which is comfortably within the company's cash cushion.

Despite the potential for a dividend hike, risks remain. These include recharter exposure for the steamers after 2028, interest-rate sensitivity following the swap roll-off, and operational/geopolitical risks such as off-hire, sanctions routes, and dry-dock timing. However, Dynagas' long-dated, fixed-hire charter backlog with blue-chip counterparties, steady amortization with no term maturities until 2029, and a cleaner capital stack post-Series B redemption provide a meaningful cushion.

In conclusion, Dynagas LNG Partners' improved financial position, driven by debt reduction and strong cash flows, could lead to a dividend hike. This could further boost the company's units and potentially reignite bullish sentiment on the stock. However, investors should remain aware of the associated risks.