New York-listed Genco Shipping & Trading has laid out a formula. And now analysts are hard at work calculating just how high the bulker owner’s new high-payout dividend might get in the coming year. Genco has laid out a $10.75m reserve for the next quarter that assumes the company will make about $35m in voluntary debt amortization payments for all of 2022 — its main use of cash besides returning capital to shareholders. With that information in hand, analysts are placing their bets on the size of the distribution. Clarksons Platou Securities analyst Omar Nokta sees a payout of $0.35 per share for the current quarter, to be distributed in February, and then a dividend of $2.18 per share for all of 2022. Noble Capital Markets analyst Poe Fratt goes even higher, placing his 2022 estimate at $3.86 per share. And Jefferies analyst Randy Giveans is somewhere in the middle with a $3.24 per share estimate for next year, and a $0.50 estimate for the current quarter.

Questions about the new policy dominated New York-based Genco’s earnings conference call for the third quarter on Wednesday, although researchers also sought out chief executive John Wobensmith’s commentary on the steep drop in dry rates in recent weeks. Capesize rates have plummeted from highs near $85,000 to about $27,000 in a matter of weeks, with the Baltic Dry Index sliding below 3,000 for the first time since June. “We’re clearly seeing an unwinding of congestions in ports,” Wobensmith said, noting that the problem had helped push rates upward. Lower iron ore imports connected with a Chinese government clampdown on steel production also had played a part, he said. “Also, there’s been a tremendous amount of activity in the FFA market. I think there have been a lot more financial players in the FFA market over the past 12 months. There have been some wild, violent swings. When that calms down, you usually have a more stable physical market.”

While the market is heading into a period of seasonal weakening that will continue into the Beijing Olympics and Chinese New Year next quarter, “I believe we could have another push upward from where we are before the end of the year,” Wobensmith said. Whether that happens will play a part in the size of Genco’s first dividend payout under the new model. The owner of capesize, supramax and ultramax bulkers has fixed 71% of operating days at $36,879 in the fourth quarter, an improvement of 26% over third-quarter rates. But Genco has warned that it has around eight capesizes that will come open in the next weeks into the weaker market, and that this will be complicated by the need to ballast them into the Atlantic Basin.

Genco’s new high-payout dividend model is premised on its ability to pay down debt to low levels. Its target is total debt of $246m by year’s end, which would represent a 45% reduction for the start of 2021. If the shipowner makes voluntary amortization payments of $35m next year, there would be no amortization due until the end of 2025. One more year at the same clip would mean no amortization due until the loan matures in late 2026. The company’s goal is to reach zero net debt, with an eventual target of zero debt altogether. But freight markets will have a say in that. “As I’ve said before, we actually really want to make sure we can put our hand on our heart and say we have a sustainable dividend model regardless of the market,” Wobensmith told analysts. “We’re in a fantastic spot. We have the brightest long-term future we’ve ever had in the company’s history. And while we do want to reward shareholders in the short term, we also want to reward the shareholders who will be with the company five or 10 years from now.” Genco is coming off its strongest quarter of earnings since 2008. The company came in line with analysts’ consensus earnings expectations of $1.44 per share, raking in net income of $57.1m. This flipped a net loss of $21.1m, or $0.50 per share, in the third quarter of 2020.