Safe Bulkers: A Value Shipper With A Big Dividend
Summary
- The Industrials sector is nearing a key bullish breakout level vs the overall stock market.
- The Marine industry is often a spot of speculation, but one company sports decent earnings and shareholder accretive features.
- Safe Bulkers is a small-cap shipper with a defined price point to monitor.
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A bellwether sector I’m watching right now is Industrials. The cyclical area has had its fits and starts relative to the S&P 500 SPDR ETF (SPY) in 2022. Right now, the sector is near a key breakout point. If we see the Industrials ETF (XLI) breakout vs. SPY, that would have bullish implications for the broad market.
Eyeing A Bullish Industrials Relative Breakout
Stockcharts.com
One industrials niche popular with both value investors and speculative traders is Marine Shipping. Drybulk carrier stocks are notoriously volatile and can feature fast money for those swinging for the fences. The industry today, though, has a few companies that have decent fundamentals and top- and bottom-line growth. One name that handily beat profit estimates on July 27 sports a low earnings multiple, a high dividend yield, and is buying back stock.
According to Fidelity Investments, Safe Bulkers, Inc (NYSE:SB) provides marine drybulk transportation services. It owns and operates drybulk vessels for transporting bulk cargoes primarily coal, grain, and iron ore. As of March 18, 2022, the company had a fleet of 40 drybulk vessels with an average age of 10.4 years; and an aggregate carrying capacity of 3,925,500 deadweight tons. Its fleet consisted of 12 Panamax class vessels, 7 Kamsarmax class vessels, 15 post- Panamax class vessels, and 6 Capesize class vessels.
The $452 million market cap Marine industry company in the Industrials sector trades at just a 2.2 trailing 12-month price-to-earnings ratio and pays a high 5.56% dividend yield, according to The Wall Street Journal. Trading just 1.2-times last year’s revenue, the stock looks inexpensive on both a multiple of earnings and sales. Safe Bulkers could be a huge winner if the stock simply returns to its 2017-2018 sales multiple.
SB's P/S and P/E History: Cheap At Current Valuations
Koyfin Charts
Looking ahead, SB’s corporate event calendar shows a dividend payable date of Thursday, September 1, according to Wall Street Horizon. There’s also a shareholder meeting taking place on Monday, September 26 before an unconfirmed Q3 earnings date on the 2nd of November.
Safe Bulkers' Corporate Event Calendar
Wall Street Horizon
The Technical Take
With a low price-to-sales ratio, cheap P/E, and high yield, what does the chart say? I see good support around $3. After bottoming out under $1 in 2020, the stock saw big bullish volume during a pair of thrusts last year. Notice how $3 has held on a trio of tests since last summer. That spot was resistance in early 2021 and was also significant when the stock traded at loftier valuations back in late 2017 and early 2018.
I think being long here, and potentially adding to a position if SB dips toward $3, makes sense. A sell stop should be entered under the lows from July last year. For now, there’s resistance near $5, so taking profits there would be prudent.
SB 5-Year Chart: Key Support At $3
Stockcharts.com
The Bottom Line
Safe Bulkers is a value play with a defined price level above which to be long. Meanwhile, investors are paid to wait, given the company’s hefty yield. Investors should watch out for potential volatility at next month’s shareholder meeting, but a long position in the low- to mid-$3s looks good.
This article was written by
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.