Frontline, Ltd. (FRO) shares recently traded lower after hitting a new 52-week and all-time high above the $72 mark in late June. This stock is currently pressuring a key support level and looks well positioned to rebound. At these levels, especially when considering the nice dividend Frontline pays, this stock looks like a great deal.

Frontline, Ltd. engages in the ownership and operation of oil tankers and bulk carriers. The company’s fleet consists of 86 ocean tankers. The company was founded in 1948, carries a market cap. of $4.50 billion, and is based in Hamilton, Bermuda.

Frontline’s share value appreciation comes in response to the company’s excellent fundamentals, on display when Frontline reported excellent second-quarter results on May 22.

Another Strong Quarter

Revenue was up more than 52% to $528 million. Net income also grew considerably, jumping to $221 million from $159 million in the same period last year. This produced earnings of $2.95, which includes gains from selling assets and the spin-off of a subsidiary.

Frontline noted that the strong quarterly results were a product of higher rates in the spot markets. The spot earnings for the company’s double hull VLCC and Suezmax vessels were $104,700 and $53,700 in the first quarter, compared to $43,600 and $37,500 in just the fourth quarter of 2007.

A Big, Fat Dividend

Frontline has a reputation of paying a very hefty quarterly dividend, and they didn’t disappoint this quarter when it paid out $2.75 per share.

Estimates Are Up

Analyst earnings estimates have been somewhat volatile within the last month, but the macro-level trend is very strong. The current-year estimate is up to $5.70 per share from $4.05 per share 90 days ago.

Based upon this earnings projection, this stock is attractively priced, carrying a forward P/E multiple of just over 11.5X.

Strategy in Play

On July 2, Frontline announced that it had successfully delivered its fourth and final heavy lift vessel, which concludes the conversion process of four Suezmax ships into heavy lift vessels. The expected net cash generation of $28 million in the second and third quarter will positively effect Frontline’s dividend payment. The total gain on the deal is expected to be $285 million.

The Chart

As previously mentioned, shares of FRO recently dipped lower after setting a new 52-week and all-time high. This stock is now pressuring a key support level just above $59. The stochastic is also signaling that this stock is trading in over sold territory.

Content Courtesy: Zacks Investment Research

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