There's more talk in the press these days about pirates overrunning Indian Ocean shipping lanes than about the shipping business itself. And for the contrarian-minded investor that's one sign in favor of taking a closer look.
IN PICTURES: Digging Out Of Debt In 8 Steps
During last year's market debacle perhaps no industry was as bitterly scorned as the shippers - and that includes the oft-maligned financials. The Baltic Dry Index, which measures prices paid for dry bulk, oceangoing containers dropped from highs of roughly 12,000 last summer to below 1,000 in a matter of only a few months as business in nearly all bulk commodities came to a standstill. Literally no one wanted to finance the movement of these goods, primarily over worries of the solvency of the financiers themselves. In short, it was not a situation that would have made the late Aristotle Onassis very happy.
Credit Market Normalcy
The situation has improved as credit markets returned more or less to normal, and the shipping business found partners for its predominantly letter-of-credit financing.
Here are three dividend-paying shippers who are looking particularly seaworthy in light of the recovery in the global economy.
Ship Finance International Ltd. (NYSE:SFL) operates more than 50 supersized crude oil and dry bulk carriers internationally. The company pays an annual dividend of about 9% and has a one-year trailing P/E ratio of 6.5. SFL stock has more than tripled in value since bottoming in March of this year at $4.01. It now trades above $13.
Great Fundamentals and a Hearty Dividend
International Shipholding Corporation (NYSE:ISH) owns 31 ocean-going vessels and numerous rail interests. ISH shares offer an annual yield of 7% and trade with a P/E of slightly more than 5.5 times last year's earnings. The shares are up nearly double from 52-week lows set six months ago.
The company's year-over-year profits more than doubled during the first two quarters of 2009 as gross revenues increased from $124.9 million to $197.9 million. ISH also possesses several enviable value metrics, including very low price/book (0.92) and price/sales (0.56) ratios.
Tsakos Energy Navigation Ltd. (NYSE:TNP) pays an impressive 10% annual yield to common shareholders and trades with a lowly P/E of 5.5. Tsakos operates 46 crude oil and natural gas tankers from its global headquarters in Greece.
Price to book on the shares is 0.64 and price to sales is just 1.08 - both indicators of good value. (Read The Value Investor's Handbook to learn value techniques the pros use.)
The Wrap
The shipping business appears to have found its sea legs in 2009. For investors seeking income with good fundamentals, these are three issues worth weighing anchor for.
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