Flex LNG's Strategic Share Buyback and Dividend Policy: A Case for Undervaluation and Shareholder Value Creation

In the ever-evolving energy landscape, Flex LNG Ltd. (NYSE: FLNG) has emerged as a compelling case study in disciplined capital allocation and shareholder-centric strategy. With a $15 million share buyback program announced in August 2025, coupled with a 12% dividend yield and a fortress balance sheet, the company is sending a clear signal: its shares are undervalued, and its long-term fundamentals remain robust. For investors seeking exposure to a high-margin, cyclical-insensitive sector, Flex LNG presents a near-term opportunity worth evaluating.

Financial Performance: Stability Amid Operational Hurdles

Flex LNG's Q2 2025 results underscore its operational resilience. Despite a 2.7% sequential decline in vessel operating revenues to $86 million, driven by drydockings and a lower charter rate for Flex Constellation, the company maintained adjusted net income of $24.8 million ($0.46/share). This performance was bolstered by a 100% technical uptime (excluding drydockings) and a Time Charter Equivalent (TCE) rate of $72,012 per day—a metric that, while slightly lower than Q1, remains well above industry averages for its segment.

The company's ability to sustain profitability despite soft spot market conditions highlights the strength of its 56-year firm charter backlog (potentially extending to 85 years with options). This long-term visibility insulates Flex LNG from short-term volatility, a critical advantage in the LNG shipping sector, where demand is projected to grow steadily through 2030.

Share Buybacks and Dividends: A Dual Engine for Value Creation

The $15 million buyback program, authorized to repurchase up to 900,000 shares through November 2025, is a strategic move to capitalize on what management perceives as an undervalued stock. At a share price of $25, the program implies a potential 3.6% reduction in shares outstanding, which, combined with the company's 12% dividend yield, creates a powerful tailwind for earnings per share (EPS) growth.

The buyback is funded independently of dividend policy, which has remained steadfast for 16 consecutive quarters. Flex LNG's $0.75/share quarterly dividend—consistent with its 12% yield—has returned $690 million to shareholders since 2021. This dual approach of buybacks and dividends reflects a disciplined capital structure, with $412.7 million in cash and no debt maturities until 2029 providing ample flexibility.

Balance Sheet Strength and Strategic Refinancing

Flex LNG's financial position is a cornerstone of its value proposition. The company's $412.7 million cash balance, coupled with a debt maturity profile extending to 2029, ensures it can navigate economic cycles without compromising liquidity. Recent refinancing and sale-leaseback agreements for vessels like Flex Courageous and Flex Resolute have further extended debt maturities and improved flexibility.

The decision to delist from the Oslo Stock Exchange (OSE) on September 15, 2025, and focus exclusively on the NYSE is another strategic move. By consolidating its listing, Flex LNG simplifies its capital structure and aligns with a broader investor base, potentially enhancing liquidity and reducing administrative costs.

Sector Resilience and Valuation Metrics

The LNG shipping sector, characterized by high margins (Flex LNG's gross profit margin is 78.5%) and long-term contract visibility, is inherently resilient. With global LNG demand expected to rise due to energy transition dynamics and geopolitical shifts, Flex LNG's fleet is well-positioned to benefit.

At a 12% yield, Flex LNG's valuation appears attractive relative to peers. For context, the average dividend yield for LNG shipping companies in 2025 is approximately 8–9%, suggesting Flex LNG is trading at a discount to its intrinsic value. The buyback program, which targets shares at $25, further reinforces this thesis, as management's willingness to repurchase stock at this price implies confidence in its long-term trajectory.

Investment Thesis: A Near-Term Buy in a Resilient Sector

Flex LNG's combination of a high-yield dividend, strategic share repurchases, and a fortress balance sheet makes it a compelling near-term investment. The company's 56-year charter backlog, strong cash position, and proactive deleveraging efforts provide a margin of safety, while its focus on shareholder returns aligns with long-term value creation.

For investors, the key risks include short-term volatility in spot charter rates and macroeconomic headwinds. However, these are mitigated by the company's long-term contracts and financial flexibility. Given the current valuation and strategic initiatives, Flex LNG offers an attractive entry point for those seeking exposure to a high-margin, cyclical-insensitive sector.

In conclusion, Flex LNG's $15 million buyback program, paired with its consistent dividends and deleveraging efforts, signals a company in a strong position to reward shareholders. As the energy transition accelerates and LNG demand grows, Flex LNG's disciplined approach to capital allocation and balance sheet management positions it as a standout opportunity in 2025.