Euroseas: A High Dividend Dry Shipper

Sep. 9.08 | About: Euroseas Ltd. (ESEA)

Euroseas (NASDAQ:ESEA), a Greece based company, provides ocean-going transportation services worldwide. It owns and operates 16 ships that transport major bulks, such as iron ore, coal, and grains, and containerized cargoes.  

For the 6 months ending 6/30/08, revenue is more than doubled, compared to the previous period last year. So did net income. Its P/E is 5.7, and div % is 11.4%. More importantly, it has a conservative dividend payout ratio of 53%.

According to ESEA’s most recent quarterly report dated 8/14/08, about 80% of company’s ship capacity days in the remaining of 2008 have been fixed.  In 2009, 34% of its capacity is under time charter contracts or protected from market fluctuations.  This kind of contract coverage gives ESEA a solid revenue base for the rest of 2008 and 2009, more predictable cash flows and sufficient downside protection.

As you can see from data provided by Yahoo below, all ESEA’s financial metrics (P/E, ROE, debt ratio, and profit margin, etc) are better than the industry average:

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Source: Yahoo Finance 9/8/08

In the data provided above, I also list few major players in this industry:

Dianna Shipping (NYSE:DSX)’s PE is higher than ESEA. Though it has 15.2% dividend, its 119% dividend payout ratio looks un-sustainable to me.

One of main reasons lots of investors are interested in shippers is for its high dividend, just like REITS, to provide us with long-term sustainable income stream. For this reason, DryShips (NASDAQ:DRYS)’s 1.3% dividend is definitely not qualified.

Frontline (NYSE:FRO), the biggest shipper in this industry has way too much debt. Its debt to equity ratio is 5. In this credit-crunch market, I like to have some safety margin.

Disclosure: I have a long position in ESEA