Hook & thesis
SFL Corporation Ltd. is one of the cleaner ways to get exposure to asset-backed shipping and offshore tonnage while pocketing a very large cash yield. At the current price of $9.14 the shares offer a trailing dividend yield in the double digits (about 10.7%) and trade only modestly above book at a PB of 1.28. That combination is attractive, but the trade is binary in an important respect: the stock's next leg higher depends materially on a localized outcome tied to a specific asset/legal situation often referenced internally as "Hercules." If that issue resolves positively for SFL, the company can consolidate a large cash inflow and the shares have clear upside to the $11 area and beyond. If it goes the other way, the yield looks less secure and downside is meaningful.
Why the market should care
SFL is a vehicle that owns and operates vessels and offshore-related assets across multiple jurisdictions. For most investors the two things that matter are: (1) the value of those assets relative to market capitalization, and (2) the company's ability to convert legal or receivable wins into cash. Right now market participants are pricing SFL at a $1.27B market cap against a company that regularly uses fixed-income markets (the company placed NOK 750m senior unsecured bonds on 09/11/2024) and pays meaningful quarterly dividends (the company announced a $0.20 quarterly dividend alongside its Q3 2025 presentation on 11/11/2025). A one-time collection or a favorable ruling tied to the Hercules situation could materially lift distributable cash and push the shares toward their 52-week high of $11.13.
Business snapshot, in plain numbers
- Market cap: $1,267,149,490.
- Current price: $9.14 (intraday high today $9.17, low $8.84).
- Dividend yield: ~10.67% (implied by recent payouts and current price).
- PB ratio: 1.28, suggesting the market values equity slightly above reported book.
- Shares outstanding: 138,562,000; float ~102,415,192 shares.
- 52-week range: $6.73 - $11.13.
- Technicals: 10-day SMA $8.80, 50-day SMA $8.23, RSI ~69.9, MACD marginally bullish.
Those numbers frame the simple story: the market is not paying a premium for growth here; it's pricing SFL as an asset owner whose upside requires either higher charter rates, successful balance-sheet events (debt refinancing, bond issuance), or collection of contested receivables/settlements.
Support for the thesis from recent developments
- Legal cash flow potential: SFL won a ruling in the Oslo District Court against Seadrill ordering payment of roughly $48m for breach of contract on 02/05/2025. The ruling is subject to appeal, but if that award is collected it would be a non-trivial cash inflow relative to market cap and could be used to support dividends or reduce leverage.
- Debt management: SFL has shown access to fixed-income markets, placing NOK 750m of senior unsecured bonds due 09/25/2029 on 09/11/2024. Management has used bond issuance to extend maturities and refinance earlier buckets of debt, which reduces near-term liquidity risk if done prudently.
- Dividend track: The company disclosed a $0.20 quarterly cash dividend alongside its Q3 2025 presentation on 11/11/2025 and paid on 12/29/2025 after an ex-dividend date of 12/12/2025. At current prices that payout contributes materially to the headline yield.
Valuation framing
At a $1.27B market cap and a PB of 1.28, SFL sits close to reported book value. In asset-rich shipping names book value is a natural anchor, and PB ~1.2-1.4 often signals the market expects stable operations but limited multiple expansion absent catalyst. The negative PE (reported -506) is a reminder that GAAP profits are distorted by depreciation, asset sales, and infrequent gains/losses; earnings multiples are not as useful here as balance-sheet measures and free cash flow potential.
Given the firm's asset ownership model, a cleaner way to view valuation is: if the company collects the Seadrill award and resolves the Hercules matter favorably, distributable cash and visible dividend coverage improve, making the current yield and PB look attractive. Conversely, if those items are delayed or reversed the market will reassign a lower multiple and the high yield will be seen as a distress signal rather than a buying opportunity.
Catalysts (what will move the stock)
- Resolution of the Hercules matter - if the underlying asset/legal issue is resolved in SFL's favor, expect a re-rating as cash converts to the balance sheet.
- Collection/settlement of the $48m Seadrill award - confirmation of funds received or a binding settlement would be a clear positive.
- Dividend announcements and sustainability commentary from management - any move to explicitly underline coverage or a stable dividend policy would reduce headline risk attached to the yield.
- Bond issuance or refinancing updates - better-than-expected terms or aggressive maturity extension would remove a near-term overhang.
- Quarterly fleet utilization and charter rate improvements - higher utilization or improved day rates in relevant segments would lift operational cash flow.
Trade plan (actionable)
| Entry | Target | Stop | Trade Direction | Time Horizon |
|---|---|---|---|---|
| $9.14 | $11.00 | $8.20 | Long | Mid term (45 trading days) |
Plan details:
- Entry: buy at $9.14. This is very close to intraday levels today and offers immediate exposure to the dividend while positioning for the catalyst window.
- Target: $11.00. This sits slightly below the 52-week high of $11.13 and reflects a re-rating toward book plus some premium if cash events are confirmed.
- Stop: $8.20. That level is under the 50-day SMA (~$8.23) and reflects a disciplined cut if the technical and catalyst picture breaks down.
- Horizon rationale: mid term (45 trading days) is appropriate because the key catalysts (legal resolution, cash collection, bond refinancings or dividend commentary) are binary events that typically resolve over weeks to a few months. Keep the size moderate relative to portfolio due to headline legal sensitivity.
Risk profile & what could go wrong
- Adverse legal outcome or delayed collection: The Seadrill ruling and other asset disputes can be appealed or tied up in enforcement, delaying cash inflows. A negative or delayed outcome would pressure the dividend and multiple.
- Dividend cut or suspension: The headline yield is attractive only as long as the dividend is maintained. If management scales back payouts because of liquidity or leverage concerns, the stock could fall sharply.
- Charter market deterioration: Lower day rates or weaker utilization in shipping/offshore markets would reduce operational cash flow and limit the company's ability to sustain the dividend or deleverage.
- Refinancing risk: Although the company placed NOK 750m bonds in 2024, future maturities or higher funding costs could force less favorable terms or equity-counterproductive measures.
- High short interest and volatile flows: Recent short volume and short-interest data show that the stock is actively traded on both sides. That increases potential volatility around news and can exacerbate moves on negative headlines.
Counterargument
One credible counterargument is that SFL's high yield is a fair warning sign. If the Hercules matter or other receivable claims do not convert to cash quickly, investors may demand a higher risk premium for the company’s asset- and jurisdictional complexity. In that case the market could push PB below 1.0 and the dividend could be trimmed, leaving limited upside and meaningful downside. That outcome is plausible given the legal appeals environment and the complexity of enforcing cross-border awards.
Conclusion and what would change my mind
My base stance is a conditional buy (long) with a mid-term horizon: the risk/reward looks favorable at $9.14 if you allocate a modest size and respect the $8.20 stop. The trade is predicated on a favorable resolution of the Hercules matter and concrete evidence that contested receivables like the Seadrill award will be collected and used to support the dividend or reduce leverage. If management explicitly ties dividend coverage to cash collections and shows a path to deleveraging, I would increase conviction and extend the target toward $12+.
Conversely, I would be inclined to exit or flip to a cautious stance if any of the following occur: formal notice that the Hercules matter will be delayed considerably, a formal appeal outcome against SFL on the Seadrill award, an unexpected dividend cut, or evidence that refinancing options have materially worsened. Those events would invalidate the primary upside thesis and move the fair valuation toward a distressed multiple.
Trade idea summary: tactical long at $9.14, target $11.00, stop $8.20, mid term (45 trading days). Keep position sizes modest and monitor legal/cash collection headlines closely.