|Name||Ticker||February 23 Share Price||Dividend Yield (%)||Market Capitalization ($ millions)|
|Teekey Tankers Ltd.||TNK||$11.01||11.3||430|
|Capital Products Partners LP||CPLP||$9.81||9.5||359|
|Navios Maritime Partners LP||NMM||$19.72||8.7||807|
|DHT Holdings Inc.||DHT||$ 4.85||8.4||231|
|Star Bulk Carriers Corp.||SBLK||$2.45||7.8||160|
|Knightsbridge Tankers Inc.||VLCCF||$25.27||8.5||563|
|Crude Carriers Corp.||CRU||$15.43||8.0||241|
|Martin Midstream Partners LP||MMLP||$39.81||7.8||692|
|Ship Finance International Limited||SFL||$ 20.62||7.2||1,594|
|Baltic Trading Limited||BALT||$9.45||7.0||153|
|Teekay Offshore Partners LP||TOO||$28.69||6.7||1,535|
|Teekay LNG Partners LP||TGP||$38.31||6.8||2,050|
|Safe Bulkers, Inc||SB||$9.16||6.8||582|
|Paragon Shipping Inc.||PRGN||$3.19||6.5||157|
|Tsakos Energy Navigation Ltd.||TNP||$9.89||6.2||445|
- Low valuation as measured by Price to Operating Cash Flow (here after referred to as cash flow) ( <20x )
- A growing stock as measured by projected 5 year earnings growth ( >10% )
- God asset productivity as measured by 5 year average Return on Assets ( >3% )
- Market capitalization of sufficient size ( >$300 million, with a preference for >$1 billion)
- The modified Gordon growth formula = Dividend yield + earnings growth – required return ( >0% ) is used to compare growth, risk, and income.
Price/ Cash Flow (x)
Table 2: Top 10 Transportation Dividend Stocks Data provided by Zacks.com services.
Ticker Name Last Close Feb.y 23 Div. Yield % Long- Term Growth Consensus Est. (%) 5 Year ROA (%) Market Cap ($ Millions) Modified Gordon Growth Factor (%) TAL TAL Int'l Group, Inc. 33.62 4.8 5.6 12.5 3.1 1,032 3.08 TGH Textainer Group Holdings Limited 33.72 3.4 8.4 12.0 6.9 1,625 2.94 GMT GATX Corp. 34.45 3.4 5.5 14.0 2.7 1,595 5.17 GOL Gol Linhas Aereas S.A. 13.03 3.1 3.0 14.0 4.0 1,737 2.75 ALEX Alexander & Baldwin, Inc. 41.62 3.0 14.6 9.5 3.8 1,718 0.51 UPS United Parcel Service, Inc. 73.47 2.8 18.0 11.5 10.5 72,657 6.03 NSC Norfolk Southern Corp. 63.7 2.5 10.1 17.1 5.4 23,147 10.08 CPA Copa Holdings, S.A. 51.96 2.1 8.3 10.0 9.8 2,265 1.34 UNP Union Pacific Corp. 92.54 1.6 10.7 18.6 4.9 45,636 10.08 CP Canadian Pacific Railway Limited 65.75 1.6 9.8 18.0 4.6 11,121 8.79
The first observation is that this list was unusual since none of the top yielding stocks made it to the final cut. Many were removed from consideration due to an overall lack of size in terms of market capitalization. However, it should be noted that smaller capitalization stocks often outperform their larger rivals due to easier growth prospects despite scale disadvantages. The second observation is that the overall earnings growth prospects are quite strong and cash flow valuations appear to be quite reasonable. The third observation is that correlation between valuation multiples was very low. The correlation between price to sales and price to cash flow was 2% and the correlation between price to cash flow and trailing P/E was 32%. These lower correlations suggest different cash cost structures or differences in investment plans.
Price/ Cash Flow (x)
- Data samples – the screening uses the most recent historical performance. Companies have anomalous years and quarters that could throw off this assessment should the most recent data be from a poor year. Furthermore, 5 year time frames are used for data types which could result in distortion based on a data that is 5 years old. For example, a company that has refocused its business 4 years ago and exited unprofitable markets might have a flat to declining 5 year sales growth record, but still be an excellent investment opportunity.
- Trade offs – I screen out companies with higher price to cash flow ratios; however, with sufficient growth these companies could offer better potential than a slow growth company with a slightly lower valuation multiple.
These stocks represent a way to play the improving market while maintaining some income. At the highest level, many of these stocks should represent opportunities to play the improving market.
- TAL, GOH, GMT and TGH may represent the most promising longs given their low valuation to cash flow, higher growth, and high dividend yield.
- UPS may be the bottom long option due to its high valuation to cash flow without sufficiently better growth than the other options. However, with a 2.8% yield, it still offers a decent dividend. The offset is that it has a higher ROA than most of the other stocks.
- Given many similarities between the stocks, a basket approach might be best which would also allow an investor to target the higher yielding smaller stocks.
As always, additional analysis should be completed prior to making any investment decision. These stocks certainly require fundamental analysis to assess whether their dividends are sustainable.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.