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Dynagas: Another Well-Covered Preferred Yielding 10.4%

Rubicon Associates profile picture
Rubicon Associates


  • For those investors who emphasize income, it is often difficult to find a high-yield investment that doesn't contain outsized risk.
  • While the shipping sector has gotten some traction lately, the yields continue as attractive.
  • I present you with one way to get a 10%+ yield, while mitigating the risk and volatility.
  • If you own the Series A preferred, there is a "swaportunity" for you.

Lately, I have been focused on maritime investments for both growth opportunities and yield. I have followed "shipping" (I will call it shipping although some may disagree technically) for some time and have had investments in the space for years (I started a long time ago with Frontline (FRO) and have been a fan ever since). My current focus is on LNG transport as I see the most stable growth in this sector over the next few years.

I recently wrote a research note on GasLog Partners (GLOP)(GLOP.PC) and I will continue the coverage with Dynagas LNG Partners (NYSE:DLNG).

Okay, I know the following note is long, but I try to provide enough information to get investors started down the road on a company. Please bear with the length.


The thesis backing this recommendation is two-pronged.

The first prong is the demand growth for LNG. LNG demand growth was strong and broad-based during the first nine months of 2018, growing 7% over the same period of 2017, according to data from Poten. LNG demand growth was led by China which grew approximately 42% year over year or nearly 11 million tonnes per annum (“mtpa”) as the country continues to grow its natural gas usage as a percentage of its total energy consumption. Moreover, demand from South Korea, India, Pakistan and Taiwan grew by 14%, 20%, 63%, and 8%, respectively, or a combined total of approximately 10 mtpa. The outlook for future demand growth continues to be robust, with over 6% per annum projected for 2018-2023, and more than two-thirds of this demand growth coming from countries in South East Asia and Europe, according to estimates from Wood Mackenzie.

Headline spot shipping rates for TFDE LNG carriers as reported by Clarksons averaged $82,000 in the third quarter of 2018, compared to $42,000 in

ChartDLNG data by YCharts

ChartDLNG Dividend Yield (TTM) data by YCharts

This article was written by

Rubicon Associates profile picture
Rubicon Associates is headed by a Chartered Financial Analyst charter holder with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and private companies around the world as well as advised institutional clients on fixed income strategies and manager selection. The principal has been responsible for managing nearly seven billion dollars in credit investments across the capital structure and overseeing the research and trading of credit market activities. Rubicon Associates has written for Seeking Alpha, Learn Bonds, a newsletter and TheStreet.com in addition to advising institutional and private investors.

Analyst’s Disclosure: I am/we are long HMLP, HMLP.PA, DLNG, DLNG.PB, GLOP.PC, GMLPP, CMRE, CMRE.PC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

At current prices, I will initiate a position in the DLNGpB.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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