Navigating the Waves: International Seaways Adjusts Dividend Amid Market Headwinds

International Seaways, Inc. (NYSE: INSW), a leading global crude and product tanker operator, has reduced its dividend payout for the first quarter of 2025, signaling the challenges faced by the shipping sector amid shifting market dynamics. The cut—from $0.70 to $0.60 per share—reflects a deliberate balancing act between shareholder returns and strategic priorities, as the company navigates volatile tanker rates and positions itself for long-term opportunities.

The Dividend Decision: A Response to Earnings Pressures

The dividend adjustment, announced on May 8, 2025, aligns with International Seaways’ policy of distributing 75% of its adjusted net income to shareholders. For Q1 2025, adjusted net income dropped to $40 million ($0.80 per diluted share), a stark contrast to the $144 million ($2.92 per diluted share) reported in the same quarter of 2024. This decline was driven by lower time charter equivalent (TCE) rates across all tanker segments.

Spot rates for VLCCs (Very Large Crude Carriers) fell to an average of $33,500 per day, down from $44,700 in Q1 2024. Suezmax and Aframax vessels also saw significant declines, with earnings dropping to $30,900 and $25,400 per day, respectively. Product carriers fared worse: LR1 and MR tanker spot rates plummeted to $27,400 and $21,400 per day, compared to $66,300 and $38,000 a year earlier. These figures highlight the depth of the current market slump, driven by oversupply and weakening oil demand.

Liquidity and Strategy: A Cushion for Uncertain Seas

Despite the dividend reduction, International Seaways maintains robust financial flexibility. As of March 2025, the company reported $673 million in total liquidity, including $133 million in cash and $540 million in undrawn credit facilities. Its net loan-to-value ratio remains low at 15%, ensuring ample room to weather market volatility.

CEO Lois Zabrocky emphasized that the dividend cut was not a sign of weakness but a reflection of disciplined capital allocation. “We adhere to our 75% payout ratio,” she stated, “even in challenging quarters.” This consistency has delivered a $4.00 per share dividend over the past year, yielding approximately 10% based on average share prices.

The company is also advancing strategic moves to future-proof its fleet. Recent transactions include swapping two older VLCCs for three modern MR tankers, reducing average fleet age to 10 years, and progressing on six newbuildings with environmental upgrades. CFO Jeff Pribor noted that these steps aim to optimize the fleet for long-term demand, such as rising oil consumption in Asia and constrained tanker supply due to aging vessels.

Data in Context: Market Performance and Outlook

To gauge the impact of these changes, investors should consider International Seaways’ recent performance relative to its peers and broader market trends.

While tanker rates remain under pressure, management points to positive signs. OECD crude inventories dropped by 50 million barrels in Q1, suggesting a tightening market. Additionally, spot rates improved sequentially, with VLCC earnings rising to $45,000 per day by late April 2025. These trends, coupled with long-term factors like rising global oil consumption and a constrained tanker supply pipeline, support the company’s optimism.

Conclusion: A Temporary Adjustment with Strategic Vision

The dividend reduction to $0.60 per share underscores International Seaways’ commitment to aligning payouts with quarterly earnings—a policy that prioritizes sustainability over short-term distributions. While the cut may disappoint income-focused investors, the company’s strong liquidity, disciplined fleet renewal, and strategic focus on emerging markets position it to capitalize on eventual recovery in tanker rates.

Key data points reinforce this outlook:
- Liquidity Cushion: $673 million in liquidity provides ample financial flexibility.
- Fleet Modernization: A 10-year average fleet age and newbuildings with advanced features enhance competitiveness.
- Market Dynamics: Oil demand growth in Asia and constrained tanker supply could drive recovery, as seen in sequential rate improvements.

For investors, the dividend adjustment appears less a cause for concern and more a strategic pause. International Seaways’ blend of financial discipline and long-term vision suggests it is navigating today’s headwinds while steering toward calmer, more profitable waters ahead.