Knightsbridge Tankers reported net income of $9.5 million and earnings per share of $0.39 for the fourth quarter, compared to net income of $9.1 million and earnings per share of $0.37 for the third quarter of 2011. Net income increased primarily due to an improvement in the results of the VLCC Kensington, which is operating in the spot market. The average daily time charter equivalents earned by the company’s very large crude carriers (VLCC) and Capesize vessels were $26,900 and $36,500, respectively, compared with $25,300 and $36,800 in the preceding quarter.

The problem is a glut of new tankers and dry-bulk carriers have entered the global fleet over the past 18 months, swamping demand and pushing day-rates to multiyear lows. Major shareholder Golden Ocean Group (OSLO: GOGL, OTC: GDOCF) recently filed to sell about 2.5 million shares of Knightsbridge Tankers, while one of the tanker company’s customers, the troubled Japan-based Sanko Steamship (Tokyo: 9112), announced it couldn’t pay its bills on time.

Knightsbridge Tankers should be able to maintain its current dividend payout for the next two to three years, but the risks are rising and there are no upside catalysts for the stock until tanker rates turn. Sell Knightsbridge Tankers for a 5.9 percent loss.