elliot_mllr

SEA: Stable Returns in a Choppy Market?

Over 90% of the world's cargo travels by sea transport. Shipping stocks are volatile in the short term but provide substantial and stable dividend yields. The lines mentioned in the above comment are all charterers of SSW on long term charters. SSW's average unexpired charters for its ships on the water is 7 years, with the first expiring in 5 years. Its newbuilds are chartered for 11 years from delivery of the vessels. SSW's earnings are highly visible. It has a banking consortium of 22 banks and has adequate lines available to complete its newbuildong program. While its shares have fallen in half in the last two months or so, its earning power remains unimpaired and its dividends are stable and the yield is extraordinary at today's bargain price.

A New Way for Investors to Sail the Seas

One problem with the analysis is that it does not take into account the individual characteristics of the companies. There are dry bulkers, wet tankers, LNG tankers and container ships all included in the chart. Within each group there are differences (for example EGLE's fleet is Supramx and Handymax, while GNK's includes Panamax and Capesize) and between groups there are differences (dry bulkers react to the BDI, most tankers are in pools that share profits, etc.). The rate of new building underway is greater for tankers and containers than for dry bulkers and within the dry bulk sphere the rate of new buildings is lower for Supramax than for Capesize and Panamax. Also different is the mix between charter lives and spot. Some, like Frontline, are highly exposed to spot prices. Many dry bulkers have 3-5 year charters and Sea Span has every vessel on the water and in construction subject to 11 year charters (in the case of new-builds, beginning when they are completed).
In short, shipping is too varied an industry to present as a monolith,without differentiation by company and function.