Seaspan: Undervalued, High-Yield Chinese Shipper

Seaspan Corp. (SSW), a Hong Kong-based container ship company recently listed on the NYSE, is an undervalued, high-yield play on the emergence of China. It currently trades at a 50% discount to the replacement value of its fleet and pays 7.9% on its dividend, yet is exposed to rising trade between China and the rest of the world. So notes Irwin Michael, portfolio manager at ABC Funds.

When Mr. Michael speaks, we might listen. His Fundamental-Value Fund has returned an impressive 18.1% annually over the past 15 years, and his American-Value Fund has returned 14% annually since inception ten years ago.

Seaspan acquires, or contracts to build, vessels that it leases out under long-term contracts. Over the next three years, the company expects to have another 24 ships ready for leasing, which should increase cash flow and enable an increase in the dividend (payout ratio currently is 85%).

Comments

[Riverboat]

That 7.9% sounds like a good return but I wonder if there are any tax deductions from the dividend payment?