FLNG - Flex LNG: Higher Dividends + Higher Leverage = More Pain In The Future

• FLEX LNG has recently provided a staggering 33% increase to their already very high double-digit dividend yield.
• This has been driven by record high daily rates for their LNG tankers and has seen their operating cash flow surge over 200% year-on-year during the first quarter of 2021.
• When looking ahead into the future, this appears to be the top of the cycle with daily rates already normalizing back towards their historical levels.
• The bigger issue is not necessarily the dividend coverage but the fact that they are way too overleveraged and thus their dividends are very risky once their temporarily boosted earnings fade.
• Since this seems to be around the top of the cycle for their industry and their leverage is dangerously high, I believe that downgrading to a bearish rating from neutral is now appropriate.

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