Polemic: A Lost Decade For Shipping Stock
Summary
- A short polemic on an interesting article.
Today I have read an article on HellenicShippingNews.com called Lost Decade for Shipping Stock. I think it is a great opportunity to think about.
Now during summer and holidays is the right time to have a small rest from a day-today market analysis.
A decade after the Great Recession, shipping stocks once again wallow in a sea of red, with yet another plunge on Friday due to coronavirus fears.
Last week I wrote an article about perspective of LNG shipping stocks. I show a chart with my new UP World LNG Shipping Index versus etf SPY. Here is the updated chart again. The divergence is obvious.
(source: UP-Indices.com)
Price of LNG shipping stocks on average offer lower yield than the rest of the US market.
Here is a chart of the old UPF index with a longer history. UPF index consists of 8 US listed LNG shipping companies and partnerships, the new UP World LNG Shipping Index reflects development of 17 world companies.
This chart shows that paid dividend and distribution made a main income for investors and shaded that the price of stock or unit is constantly losing.
So at this point the article is right, investors were losing a long time and many didn´t know about it.
Is the situation different now? I think yes, it is different. Many dividends are cut or stopped and price of stock is more important for management. Investors have to be very selective with their buying.
Larger U.S.-listed owners have sold almost no equity capital this year, because shares are trading well below NAV.
This statement is also right. Many investors trusted managers that the dividend is healthy and won´t be cut just to be cut next turn. This wasn't fair to investors and is unacceptable. I hope that after March falling CEO´s will be more careful with their statements and start to build a reliable company or partnership. Market conditions changed and shipping rates fell. High dividend income is unimaginable today. The LNG sector is much greater than a few years ago and its mechanisms are much more consolidated.
Now it is time to think about new investment into LNG shipping stocks. Make your analysis alone, don´t follow hot tips.
Good luck!
Analyst's Disclosure: I am/we are long DLNG.
I also have small positions for study purposes in each of eight stocks included in UPF LNG Shipping Indices.
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