SFL: Dividend Yield And Fleet Investment Will Drive Returns Despite Drilling Headwinds

Analysts have nudged their price target on SFL higher from $10.00 to $11.00 per share, citing stronger than expected Q3 EBITDA, a resilient dividend policy implying an attractive 10% yield, and continued fleet investment supported by remaining buyback capacity, despite near term headwinds from re-deliveries and a soft drilling market.

Analyst Commentary

Bullish analysts highlight that the recent earnings beat and unchanged dividend framework reinforce confidence in SFL's ability to execute on its capital allocation strategy, even as certain operating segments face cyclical pressure.

They view the higher price target as a reflection of improved earnings visibility and a more supportive risk reward profile at current levels.

Bullish Takeaways

• The 19% beat versus consensus EBITDA is seen as evidence that SFL is executing ahead of expectations, supporting upward revisions to valuation multiples and target price.
• Maintaining the 20 cent dividend, at only a 41% payout of operating cash flow, signals balance sheet discipline and dividend sustainability, reinforcing the appeal of the 10% implied yield.
• The remaining 80 million dollars in buyback capacity through mid 2026 provides an additional lever for capital returns, which bullish analysts believe can support per share growth and downside protection.
• Ongoing fleet investment is viewed as positioning SFL for medium term earnings growth, with potential upside as market conditions normalize and asset utilization improves.

Bearish Takeaways

• Bearish analysts caution that re deliveries and softness in the drilling market may cap near term operating cash flow, limiting how quickly earnings can grow into the higher valuation.
• The absence of buybacks in the recent quarter is viewed by some as a signal that management is prioritizing balance sheet resilience over immediate per share accretion, potentially tempering upside in the short term.
• Reliance on a high dividend yield as a key component of the equity story may leave the stock vulnerable if cash flow volatility increases or if management is forced to recalibrate the payout.
• Uncertainty around the timing of a recovery in drilling and related segments keeps some investors cautious on forecasting a sustained step up in growth and returns on capital.

What's in the News

• SFL Corporation Ltd. has filed a follow on equity offering of approximately 10 million common shares, targeting gross proceeds of about 81.4 million dollars at an indicated price of 8.14 dollars per share, with the transaction structured to include a dividend reinvestment plan (Key Developments).
• Between August 19, 2025 and September 30, 2025, SFL repurchased 2,347,752 shares, representing roughly 1.77 percent of shares outstanding, for a total consideration of 20.2 million dollars, completing the previously announced buyback program (Key Developments).

Valuation Changes

• Fair Value: unchanged at 9.43 dollars per share, indicating no revision to the intrinsic value estimate.
• Discount Rate: risen slightly from approximately 9.75 percent to about 9.96 percent, reflecting a modest increase in the required return.
• Revenue Growth: effectively unchanged, remaining modestly negative at around minus 1.68 percent, implying similar top line expectations.
• Net Profit Margin: stable at roughly 13.6 percent, with only immaterial numerical rounding differences between the prior and updated assumptions.
• Future P/E: risen slightly from about 16.1x to roughly 16.2x, suggesting a marginally higher valuation multiple applied to forward earnings.