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Dividend Investors Have To Weigh Shipping Fundamentals and Outlook (NAT, ALEX, OSG, ESEA, SFL, DRYS, SHIP, SEA)

Administrator — Wed, 15 Feb 2012 19:30:22 +0000

The world of shipping dry goods, sea containers, and oil and commodities has been in a very strange place so far in 2012. Dividend investors need to start evaluating whether or not they want to remain or get into this sector regardless. The Baltic Dry index has recently been at a post-recovery low (see Bloomberg chart at the end) based upon excess capacity, oversupply, and fairly weak demand. The stocks which trade in the sector, most of which are international companies and ADRs (many are even Greek-flagged), often offer double-digit dividend yields that bring payouts somewhere in between the lucrative MLP sector and mortgage-REITs.

Many of the shipping stocks have been recovering in 2012 while the index for the pricing basis (chart at end) has been weak. Some shipping companies pay out more than they earn and some keep making dividend payments when they are losing money. What we really want to know is if these dividends are sustainable. There have been some pressures that recently forced one shipper to suspend dividend payments. We have glanced at the following shipping players with recent earnings and/or dividend news: Nordic American Tankers Limited (NYSE: NAT); Alexander & Baldwin, Inc. (NASDAQ: ALEX); Overseas Shipholding Group, Inc. (NYSE: OSG); Euroseas Ltd. (NASDAQ: ESEA); Ship Finance International Limited (NYSE: SFL); DryShips Inc. (NASDAQ: DRYS); and Seanergy Maritime Holdings Corporation (NASDAQ: SHIP).

We also took a look at the Guggenheim Shipping ETF (NYSE: SEA), the shipping ETF, is trying to signal that a turnaround is heading to the shipping sector. This one pays a very sporadic dividend and there is jus not even a two-year history to be able to track how its payments rise and fall through time. Because of uncertainty and pressure, the shipping sector was not a part of the 2012 Model Dividend Portfolio.

Now look at the chart on the ETF. At $17.99, the 200-day moving average is $18.21 and this has not been anywhere close to the 2300-day moving average since back in April of 2011. The question is whether this will act as a huge overhang and allow sellers to take profits or if this will be a new bullish mechanism that allows the run from the start of 2012 to continue.

Nordic American Tankers Limited (NYSE: NAT) recently posted a loss and its tax treatment understanding is that the dividend distributions of 2011 should count as a return of capital rather than as income for income tax purposes. Where the story gets interesting is that earlier this week it posted a wider than expected loss. It also sold 5.5 million more common shares back in January “to strengthen the Company’s resources, to fund future acquisitions and for general corporate purposes.” Shares are down close to 10% from when they sold shares to the brokerage firms and the prior payouts have been $0.30 per quarter for a yield of close to 8.6% if it remains static in the quarters ahead. At $13.93, the 52-week range is $1.58 to $26.18.

Alexander & Baldwin, Inc. (NASDAQ: ALEX) recently lost 7% after reporting lower 2011. The company saw a weak trans-Pacific ship market after a recent parent split-up announcement in 2011 even forced the company’s Matson unit to shut down its second China-Long Beach service. Its payout of $0.315 earlier in February at least compares to earnings estimates of $2.06 EPS for all of 2012. At $44.00, this stock only yields 2.8% today and the 52-week range is $33.09 to $55.50.

It was just a week ago that Overseas Shipholding Group, Inc. (NYSE: OSG) in the energy transportation services announced that it had suspended regular quarterly dividends based upon the downturn in international flag markets being deeper and longer than expected. Unlike other sectors, this company’s management talked about economic uncertainty in the world persisting while banking markets have become more challenging. The move is to preserve liquidity and the company plans to reassess the dividend as its end markets improve.

A smaller player named Euroseas Ltd. (NASDAQ: ESEA) in drybulk and containerized cargoes had normalized earnings of $0.04 in earnings per share while it declared a quarterly dividend of $0.05 per share as its twenty-sixth consecutive dividend. It is smaller in market cap at $93 million today, but it listed an average of 16.00 vessels were owned and operated in the fourth quarter with an average day rate of $12,099 per day.

Ship Finance International Limited (NYSE: SFL) is set to report earnings on Friday, Feb. 17 and estimates are $0.38 EPS for the quarter but the estimates are $1.37 EPS in all of 2012 (versus from $1.72 EPS in 2011). WIth its most recent payout being $0.39 per share per quarter, the company is paying out effectively all or more than all of its income. Its yield is over 12% if it remains. At $12.21 today, the 52-week trading range is $8.62 to $21.15.

DryShips Inc. (NASDAQ: DRYS) does not have a dividend, but its shares have skyrocketed and that rally has stepped back up even after petering out a few days ago. While $3.57 is a far cry from its old highs, this is up over 50% this month alone. Without a dividend this is merely a sample of how strong the moves can be around any positive news.

A smaller player named Seanergy Maritime Holdings Corporation (NASDAQ: SHIP) in dry bulk cargo is seeing a large gain on tiny volume (with a mere $25 million market cap). The gain is after positive earnings and a profit, although it said that it expects overall shipping conditions to remain weak in 2012 with new vessel deliveries only contributing to oversupply.

The dividends here are definitely not immune to the woes of the world if they get worse again. It is worth noting that the stock market has not agreed with the slower economy thesis. Maybe the rail and trucking sectors are better on a risk-reward metric. Ultimately, the verdict here remains uncertain and there is still likely to be a lot of volatility around the shipping sector as the globe floats between contraction and a low recovery continuing.

JON C. OGG

Filed under: 24/7 Wall St. Wire, ADR, Charts, China, Dividend, Earnings, Economy, Editor's Picks, International Markets, Technology Companies, Transports Tagged: DRYS, ESEA, OSG, SEA, SFL, SHIP

Baltic Dry: The Death Of An Index (SEA, DRYS, SFL, NAT)

Administrator — Thu, 02 Feb 2012 18:20:35 +0000

Just what does a cratering Baltic Dry Index mean? Frankly, it looks and acts as though it is signaling the next recession is here already rather than signaling that it is coming. That flies in the face of many current trends, but perhaps it is the woes of Europe. After all, Belgium is the first country so far to have two negative GDP quarters and the other Eurozone nations are somehow claiming that they will escape a 2012 recession. There is a lot more to the story.

The Baltic Dry Index is not just at a year low. It is back to lows at the peak of the recession 2007 to 2009. It is hard to imagine. One of the major issues may simply be high excess in capacity. Shipping may have run into the same problems as the worlds manufacturing lines. There may just be too much supply now versus demand.

Since the recession, boats have continued being built. The world just may be awash in capacity. It is surprising but the shipping stocks are actually holding up well with the stock market rather than tanking with tanker day rates. Here is how some of the more active ship stocks look, even though not all are exactly pertinent or covered under the Baltic Dry Index:

The Guggenheim Shipping ETF (NYSE: SEA) is up 0.7% today while its 52-week trading range is $13.37 to $28.21. If you tally up the last four dividend payment this one has a yield of about 5.7% but you have to keep in mind that three-quarters of that dividend is from the June quarterly payment last year.

DryShips Inc. (NASDAQ: DRYS) is down 0.5% at $2.18 and its 52-week range is $1.75 to $5.19.

Ship Finance International Limited (NYSE: SFL) is up a penny at $11.56 but its 52-week range is $8.62 to $21.15. Its dividend is well above 10% now.

Nordic American Tankers Limited (NYSE: NAT) is down five cents at $13.95 against a 52-week range of $11.58 to $26.18. Its dividend is now over 8%.

Is it possible that not all of the old ships in the world are being sent to India and Sri Lanka for scrapping any longer now that India has slowed down its blistering pace? There are many reports calling it a dead index as well. Stay tuned. Imagine how well shipping stocks might perform when the underlying price index is cooperating.

See the index chart for the last five years below….

JON C. OGG

Filed under: 24/7 Wall St. Wire, ADR, Economy, International Markets, Transports Tagged: DRYS, NAT, SEA, SFL

Top Analyst Upgrades and Downgrades (ACH, ATHR, EAT, CTV, FSLR, ICE, MPEL, NAT, PNRA, SFL, TRV, TK)

Administrator — Tue, 26 Oct 2010 12:16:57 +0000

These are some of this Tuesday’s top analyst upgrades, downgrades, and initiations seen in Wall Street research calls.

Aluminum Corp Of China (NYSE: ACH) Cut to Undeweight at JPMorgan.
Atheros Communications Inc. (NASDAQ: ATHR) Raised to Outperform at William Blair.
Brinker International (NYSE: EAT) Cut to Underperform at BofA/ Merrill Lynch.
CommScope, Inc. (NYSE: CTV) Cut to Hold at Jefferies.
First Solar, Inc. (NASDAQ: FSLR) Reiterated Buy and $175 target at Auriga.
Intercontinental Exchange (NYSE: ICE) Cut to Hold at Deutsche Bank.
Melco Crown Entertainment Ltd. (NASDAQ: MPEL) Raised target to $6.30 at BofA/Merrill Lynch.
Nordic American Tanker Shipping (NYSE: NAT) Cut to Hold at Jefferies.
Panera Bread Co. (NASDAQ: PNRA) Cut to Neutral at BofA/Merrill Lynch.
Ship Finance International (NYSE: SFL) Cut to Hold at Jefferies.
The Travelers Companies, Inc. (NYSE: TRV) Cut to Sell at Deutsche Bank.
Teekay Corp. (NYSE: TK) Cut To Neutral From Overweight By JPMorgan; Raised To Buy From Hold By Jefferies.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: ACH, ATHR, CTV, EAT, FSLR, ICE, MPEL, NAT, PNRA, SFL, TK, TRV

Top Analyst Upgrades & Downgrades (NLY, APA, STD, GMR, GILD, GS, HOG, WFR, STX, SQNM, SFL, STT, YHOO)

Administrator — Wed, 21 Jul 2010 12:24:11 +0000

These are some of this Wednesday’s top analyst upgrades, downgrades, and initiations seen from Wall Street research calls:

Annaly Capital Management, Inc. (NYSE: NLY) Raised to Outperform at FBR.
Apache Corp. (NYSE: APA) Raised to Sector Perform at Scotia.
Banco Santander, S.A. (NYSE: STD) Cut to Hold at Citigroup.
General Maritime (NYSE: GMR) Raised to Overweight at JPMorgan.
Gilead Sciences Inc. (NASDAQ: GILD) Cut to Hold at Citigroup.
Goldman Sachs Group Inc. (NYSE: GS) Raised to Outperform at KBW.
Harley-Davidson, Inc. (NYSE: HOG) Raised to Equal-Weight at Barclays.
MEMC Electronic Materials Inc. (NYSE: WFR) Raised to Buy at Kaufman Bros.
Seagate Technology PLC (NASDAQ: STX) Cut to Hold at Brean Murray; Reiterated Buy at Needham.
Sequenom Inc. (NASDAQ: SQNM) Raised to Buy at Ladenberg Thalmann; Started as Hold at Jefferies.
Ship Finance International Limited (NYSE: SFL) Cut to Underweight at JPMorgan.
State Street Corp. (NYSE: STT) Raised to Buy at Stifel Nicolaus.
Yahoo! Inc. (NASDAQ: YHOO) Cut to Hold at Citigroup.

JON C. OGG

Filed under: Analyst Calls Tagged: APA, GILD, GMR, GS, HOG, NLY, SFL, SQNM, STD, STT, STX, WFR, YHOO

Shipping Stocks Try To Find Safe Harbors (SFL, FRO, OSG, NAT, SB, SEA)

247wallst — Tue, 04 Nov 2008 11:40:48 +0000

It is no secret that shipping stocks have been horrible performers of late. In fact, they have made the dismal performance seen at some trucking companies look like trucking was a blue chip sector.

A recent industry contact told us just how bad the shipping business has gotten. A ship leased in May for a China departure was leased at more than 10-times the day rate that the same ship leased for in mid-October. His comment was that it felt as though China was going to return to farming rather than building infrastructure and manufacturing facilities.

Ship Finance International Limited (NYSE: SFL) is up almost 8% at$15.32 after it canceled plans yesterday to acquire 3 vessels for $150 millionwith 12-year charters. The company also named a new memberto its board with experience in shipping who is employeed by Frontline.The company’s 52-week trading range is $9.78 to $32.90.

Frontline Ltd. (NYSE: FRO) is also up huge today. Shares are up 12% at$37.60, and its 52-week trading range is $25.00 to $72.36.

Overseas Shipholding Group Inc. (NYSE: OSG) was just upgraded at Oppenheimer yesterdaymorning. Shares rose more than 10% yesterday and shares are up another7% at $45.00 this morning. Its 52-week trading range is $32.54 to$97.79.

Nordic American Tanker Shipping Ltd. (NYSE: NAT) is seeing a 7% rise to$32.89, which is up 50% from its lows and right in the middle of the$22.00 to $42.00 trading range of the last 52-weeks. This company’sChairman/CEO will be giving a CNBC interview this week on November 7.

Safe Bulkers, Inc. (NYSE: SB) is up big today after posting earnings of$39.2 million, or $0.72 per share, and after it declared a quarterly dividendof $0.475 per share for the quarter. At that rate on a steady basis,shareholders are clipping more than a 20% yield if you believe that canbe sustained. Shares are up 14% at $7.65 and the 52-week trading rangeis $4.16 to $19.23.

An ETF which tracks shipping stocks is the Claymore/Delta Global Shipping (NYSE: SEA), and those ETF shares are up over 4% at $12.89 today. It has only been public a limited time, but its trading range has been $9.00 to $23.60.

There are many many more shipping companies and many of these are notperforming well today. But this sector has been battered and tatteredand it really looks like investors are using the recent strength andstability in the market to perform the analysis which they have beenscared to do for anything beyond the next hour.

The rebound in these stocks didn’t come quickly enough for Britannia Bulk, which is now apparently not trading in the US any longer.

According to a chart at Wikinvest, in May 2008 the Baltic Dry Index reached a record high level since its introduction in 1998, reaching 11,793 points. In October this had fallen by more than 90% to around 851 points. It is even lower today as letters of credit for shipping are harder and harder to come by. These rates have never stayed down this low forever. That does not give any assurances that shipping stocks themselves will recover handily, but this looks like it is around the worst levels since the index was created.

Jon C. Ogg
November 4, 2008

Posted in ETF, Trading Alert, Transports Tagged: FRO, NAT, OSG, SB, SEA, SFL