Flex LNG: A Fortress Balance Sheet and 12% Yield in a Volatile LNG Market

The LNG shipping sector is a paradox of extremes: volatile spot rates, geopolitical tensions, and cyclical demand swings. Yet within this chaos, Flex LNG (FLNG) stands out as a rare oasis of stability, offering investors a 12% dividend yield backed by a fortress balance sheet, ironclad contracts, and strategic refinancing. Let’s dissect why this stock is primed to thrive even as peers falter.

The Dividend: A 12% Yield Anchored in Discipline

Flex LNG’s dividend of $0.75 per quarter since Q4 2021 has created a rare dividend aristocrat in the energy sector. With a trailing yield of 12%, investors might reasonably ask: How sustainable is this in a volatile market?

The answer lies in the company’s cash reserves and contractual backlog. As of Q1 2025, Flex LNG held $409.6 million in cash, with no debt maturities until 2028—a staggered repayment schedule that insulates it from liquidity crunches. Even with Q1 net income dipping to $18.7 million (vs. $45.2M in Q4 2024), the dividend payout of $41 million per quarter is comfortably covered by its $65.6 million adjusted EBITDA.

This chart underscores FLNG’s outlier status: its yield outpaces peers by 500–700 basis points, reflecting its superior cash generation and prudent capital allocation.

The Contractual Backlog: 59 Years of Certainty, 88 with Options

Flex LNG’s firm contract backlog is its crown jewel. At 59 years of contracted revenue, it’s a moat against spot market swings. Even better, 88 years of potential coverage exists if charterers exercise options—a near-guarantee given surging global LNG demand.

Take the Flex Constellation: after a short-term spot charter ends in 2025, it locks into a 15-year fixed-rate contract starting 2026. Similarly, the Flex Artemis will re-enter the market post-drydocking with new charters. These deals ensure revenue visibility for decades, shielding investors from near-term spot rate volatility.

This graph shows how FLNG’s contractual revenues (blue bars) remain steady even as spot rates (orange line) swing wildly—a visual testament to its defensive profile.

Refinancing: Reducing Debt Costs, Extending Maturities

Flex LNG isn’t just sitting on cash—it’s using it strategically. Refinancing initiatives for key vessels like the Flex Courageous, Resolute, and Constellation will:
1. Reduce interest costs by replacing high-rate debt with cheaper, long-term financing.
2. Extend maturities to 2030+—a move that eliminates refinancing risks for a decade.

The $175M 10-year sale-and-leaseback for the Flex Courageous alone cuts annual interest payments by ~$12M, freeing cash for dividends or accretive acquisitions.

Here, FLNG’s staggered maturities (green bars) contrast starkly with peers’ looming cliffs (red), highlighting its superior financial engineering.

ESG: Compliance Meets Operational Excellence

While ESG is often a checkbox exercise, Flex LNG has embedded it into its DNA:
- Zero Lost Time Injury Frequency (LTIF) for the third straight year—a safety benchmark.
- CDP “B” rating for climate resilience, signaling alignment with net-zero goals.
- Active participation in projects like Woodside’s Louisiana LNG, which could utilize its vessels post-2026 charters.

This isn’t just reputation-building; it’s risk mitigation. As regulators and insurers increasingly penalize laggards, Flex LNG’s ESG progress lowers its cost of capital and access to markets.

The Bottom Line: Buy the Dip, Own the Volatility

Critics might cite Q1’s 2.7% revenue drop or the 12% adjusted EBITDA decline year-over-year as red flags. But these are paper losses:
- The dip stems from one-time factors like the Flex Artemis’s variable-rate exposure and a temporary spot charter at lower rates—both of which are resolved by mid-2025.
- The TCE rate remains robust at $73,891/day—well above breakeven and a 90%+ margin on fixed contracts.

With $650M paid in dividends since 2021 and a 12% yield, Flex LNG offers both income and capital appreciation potential. As LNG demand grows (global trade up 1% YTD despite Asia’s weakness), and U.S. exports boom via projects like Louisiana LNG, this stock is poised to reward long-term holders.

Act now: The dividend is payable June 20, but with shares trading at a 52-week low, the window to lock in this yield is narrowing.

Risk disclosure: LNG shipping remains cyclical. Investors should monitor macro LNG demand trends and geopolitical risks.