After nearly a year of hearing and reading about challenges due to demand outrunning supply, there are indications that supply is catching up. Or perhaps demand is slowing due to inflation. The impact of recent COVID-19 lockdowns in China also has slowed demand in Shanghai for export vessels.
Two years ago, the Freightos Baltic Index (the spot market price for 40-foot shipping containers, or FEUs) was just under $1,500. The rate today is just over $8,200, but that is down from a peak price of $11,109 in early September of last year. Many shippers and industry analysts expect a sharp reduction in rates in the second half of this year.
U.S. retailers also are pulling their orders forward, stocking up now on expectations that inflation will continue to push their costs and the prices they charge their customers higher. There is also some uncertainty related to labor negotiations begun last week for workers at 29 ports on the west coast, including the country’s two largest in Long Beach and Los Angeles. The existing bargaining agreement expires July 1.
For investors, shipping companies that are now paying fabulous dividends may be faced with a choice of cutting those dividends or funding them by borrowing. The speed with which shipping companies can raise, lower, eliminate or initiate dividend payments is faster than in most other industries. According to one study published last October, the shipping industry’s speed of dividend adjustment “increases in recession states both in the macroeconomic and the shipping environment. The increased dividend flexibility of maritime companies appears to be in line [with] the sector’s high-risk profile. It seems that as profitability and external financing opportunities deteriorate during recession states, maritime companies adjust dividends more flexibly to secure sufficient liquidity and investment capital.”
Here is a look at seven maritime shipping companies that currently pay dividends of at least 9%.
Zim Integrated Shipping Services Ltd. (NYSE: ZIM) is an international container shipping that announced a dividend of $17.00 in early March and paid the dividend on April 4. The company’s current dividend yield is 26.75%.
Net income for the last 12 months totaled $4.64 billion. Free cash flow per share for the period was $41.47, and the total return for the past year was about 135%.
Through the March quarter, the company had paid out common dividends of $299.4 million. The April dividend payment alone totaled about $2.04 billion. The company’s payout ratio for the past year is about 6.5%.
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