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Shipping companies are very profitable due to their sound business model. They own ships, which they charter off for long periods of times to corporations. While it's a profitable business, it requires plenty of capital to keep the fleet up to date and running efficiently.

Seaspan Corporation (NYSE:SSW) is a shipping company that owns more than 70 ships. Just recently, Seaspan issued $125 million in preferreds.

Seaspan's series E carries an 8.25% yield at par. However, with the decline in the preferred, investors would get around an 8.3% yield on cost. The preferred cannot be called until 2019 and the company is under no obligation to call them. This means this preferred could be out there for perpetuity.

So let's take a look at the underlying company.

In 2012, Seaspan had free cash flow of nearly a $100 million. The dividends for the common, series C and series D were about $85 million for this period. The series E will add another $10 million to this payout.

So it seems like it's awfully close right?

Well not really because the preferreds are cumulative meaning that the common would need to be cut first. Seaspan has grown its dividend from .10 cents a quarter in 2009 to .31 cents in 2013. So Seaspan would not take on another preferred that would jeopardize its common.

Seaspan has also been able to manage its debt pretty well to avoid a credit crisis. In December, Seaspan was able to refinance a $1 billion credit facility and extend it out another four years. Part of this involved reducing its outstanding debt by $435 million.

The company has been making its balance sheet stronger by not just cutting its debt but also by raising capital. The company announced a 3.5 million common stock offering in November. The additional capital will be used to make vessel acquisitions.

It seems like Seaspan is looking to take advantage of low rates by aggressively acquiring vessels while it still can. The refinancing and stronger balance sheet means that preferreds are fairly safe. The company's free cash flow should grow as the number of vessels increases as well. I believe an 8.3% yield on this preferred is a good opportunity for income investors.

Source: Seaspan: An 8.3% Yield For Income Investors