By Paul Tracy
Opportunities like this are rare, and they certainly aren't without risk.
But if you want the chance to make a lot of money within days -- and secure a 14% dividend yield -- then I've found just the stock that could do it. This company is guaranteed to sell at least 96% of its product in 2012, it's insulated from the European debt crisis, and it offers a 13.8% current yield. Despite this, the shares have sold off in the recent downturn. But I don't see that as a negative. I think it's an opportunity for the right investors.
I've actually seen this same opportunity before, and in the exact same stock. Back in 2011, the S&P 500 fell 17% in a little more than three weeks. Many investors dumped whatever they owned, sending some stocks down, even if they didn't deserve it. Shares of this high-yield company dropped 32% in a matter of days, due solely to the broader market sell-off. But soon after, the shares were snapped back up by alert investors -- rising 29% in the week following the sell-off. Take a look:
Today, I think history could repeat itself with shares of Navios Maritime Partners (NMM).
Navios Maritime is a master limited partnership (MLP) that owns a fleet of 18 dry-bulk carriers. It's a relatively unknown stock... it only trades on about 300,000 units a day (MLPs trade in units rather than shares). That's what shares of Apple (AAPL) in about six minutes.
The recent sell-off in the broader market has caused panicky investors to dump the shares, just like they did almost one year ago. And just like back then, I'm already seeing the stock start to snap back. I think in a matter of weeks -- or even days -- the opportunity could be gone.
Already, investors have begun to pile into the stock, sending the stock up 20% in the past week alone:
But a potential rise is just one reason to like the stock. As an owner of a fleet of ships, Navios' business is simple. Navios leases its ships and crews, charging companies a daily fee known as a day rate to transport commodities. Day rates have declined dramatically in the past few year thanks in an influx of new ships, creating a supply glut.
The good news for Navios is that the company has no near-term exposure to the collapse in day rates, as the partnership uses long-term contracts, known as time charters, to lease out its fleet. These deals lock in fixed day-rates for periods of five years or longer.
All told, 97% of the partnership's available capacity in 2012 is booked under long-term time charters at day rates significantly higher than current levels. In 2013, 79% of the fleet is already booked under long-term deals, while around 77% is booked through 2014.
Given its insured and contracted charter book, Navios should have no problem sustaining its current $0.44 per quarter distribution through to the end of 2014 or longer. In fact, Navios has never cut its dividend, even during the recession, which caused many shippers to slash their distribution payments.
Of course, this stock isn't without risk. I've already shown you that the shares can be volatile. And some investors will be turned off that the company is headquartered in Greece. I think this association is partly to blame for the stock's fall.
But while technically headquartered in Greece, the company's main assets -- its 18 dry-bulk ships -- primarily operate outside of Greece and the European Union, and the ships are mainly registered to ports outside the European Union. Day rates are earned in dollars and the vast majority of Navios' contracts are signed with companies based in Asia, limiting its exposure to Greece.
Navios Maritime Partners is organized as an MLP. But thanks to its incorporation in the Marshall Islands, it reports distributions on a standard form 1099, not the K-1 used by most MLPs. This means that U.S.-based investors can hold the MLP in tax-advantaged accounts without worrying about unrelated business taxable income (UBTI) consequences that apply to many MLPs.
Make no mistake, this opportunity isn't for everyone. But the chance to lock in a yield of nearly 14% and the possibility of a quick gain in the shares simply doesn't come along often.
Disclaimer: Paul Tracy does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of NMM in one or more if its "real money" portfolios.