The latest addition to the high yield tier of our model portfolio is an oil shipper benefiting from rising day rates for oil tankers; the company is passing the rewards on to investors via generous quarterly dividends, explains Chloe Lutts Jensen, editor of Cabot Dividend Investor.

Bermuda-based Nordic American Tanker (NAT) is a shipping company with a singular focus. The company owns 23 Suezmax crude oil tankers that operate exclusively in the spot market, meaning they’re leased for immediate use and the contracts usually last no longer than three months.

That means the company’s revenues are very responsive to changes in tanker rates. Tanker rates, of course, are determined by the demand for oil transport versus the supply of tankers available to transport it.

In addition, even though oil prices are very low today, production remains elevated. High production and low prices are encouraging stockpiling, especially in China, keeping Nordic and its peers busy on the longer shipping routes to Asia.

Some countries and companies are even using oil tankers as floating storage, further constraining supply and raising prices for Nordic’s services.

Refinery demand for shipments is also high, as refiners take advantage of the chance to acquire their primary feedstock at low prices.

Low oil prices are a boon on the cost side too, making it significantly cheaper for Nordic to fuel its ships, providing a nice boost to the bottom line.

Nordic currently yields a juicy 10%. Yields like this don’t come without risk. The company is transparent about the unpredictability of its cash flow, opting for a variable dividend policy.

Rather than setting an annual dividend rate each year, management declares dividends each quarter based on net operating cash flow. That means each quarter’s dividend can be higher or lower than the last, based on revenue trends.

NAT’s peak during the last industry heyday, in 2007, was above $40 and the stock traded above $25 as recently as early 2011. So far, this year’s 90% rally has only brought the stock back to about $16.

That said, while I suspect there’s more gas in the tank, Nordic American is not a long-term holding. Rather, Nordic is appropriate for investors with medium-risk tolerance and a medium time horizon who want to add a very high current yield to their portfolio.

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