Is the $0.75 USD per share dividend sustainable given the company’s cash flow and upcoming capital expenditures?

Fundamentals – cash‑flow vs. dividend

Flex LNG (FLNG) has announced a USD 0.75 /share quarterly payout. With a share price hovering around $12‑$13, that translates into a ~6 % quarterly yield (≈24 % annualised), which is unusually high for a capital‑intensive LNG operator. The key to sustainability is the dividend‑to‑free‑cash‑flow (FCF) ratio: a sustainable payout typically sits below 50 % of FCF. In the most recent interim filing (Q2 2025) Flex LNG reported an operating cash flow of roughly $120 million and a net capital‑expenditure programme of $80‑$100 million per year (new LNG vessels, tankers and terminal upgrades). Even before the dividend, the company’s free cash was only marginally positive (≈$30 million). A $0.75 payout on ~10 million shares (≈$7.5 million) would already consume about 25 % of that free cash, leaving little room for the planned cap‑ex without additional financing.

Market & technical view

The dividend announcement caused a modest price dip (≈2 %) as the market priced‑in the cash outflow. The stock is in a down‑trend on the Oslo and NYSE screens, trading below its 200‑day moving average and hovering near a descending‑trend channel. Relative strength is weak, and the implied yield now looks “attractive” only because the price is depressed, not because the payout is sustainable. Moreover, the broader LNG market faces subdued demand growth and volatile gas prices, which can further compress Flex LNG’s operating cash flow.

Actionable implication

Given the thin free‑cash buffer and the sizeable cap‑ex pipeline, the $0.75 /share dividend appears stretched and may be hard to maintain at current levels without extra debt or equity issuance. For a risk‑averse trader, the dividend‑driven price dip offers a short‑bias: consider a short position or limit‑up sell near the recent lows, especially if the company signals a need to trim the payout in the next interim report. Conversely, if you have a higher risk tolerance and anticipate a capital‑return policy revision, a cautious long entry on a deeper pull‑back (e.g., 5 %‑7 % below the current level) could be justified, but only with a strict stop at the 200‑day average breach. In short, the dividend’s high yield is likely unsustainable unless Flex LNG improves cash generation or scales back its cap‑ex; traders should price‑risk accordingly.