Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| Earn
15+% Yields by Investing in Tanker Companies |
Published: November 1, 2005
Shipping stocks offer
dividend yields of 10%, 20%, and in some cases even 30% or more. But
you'll need to do some digging, as some of the best deals are often
found among the lesser-known names.
Finding juicy dividend yields on tanker stocks is the easy part. After
all, companies in this industry sport an average dividend yield of 6.6%
and rising. However, the most difficult task for investors is NOT
finding companies that pay the highest dividend yields. After all, that
can be accomplished in minutes by using a simple screening tool.
Instead, investors need to uncover high-quality shipping firms that are
generating sufficient cash flows to keep paying dividends at a steady or
increasing rate year after year.
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Tanker stocks have been in a
downtrend since March, and most are currently trading near their 52-week
lows. The silver lining for income investors is that the recent pullback
in share prices has caused yields to soar.
Is now the opportune time to
lock in a yield of 10%, 20%, or even 30% on these stocks?
On select stocks, maybe. The key is to find those with solid earnings
visibility. And for shippers, the key to earnings is shipping rates.
What Drives Shipping Rates?
The answer is simply supply and demand -- the supply of ships and the
demand for the products they carry. The delicate balance between supply
and demand makes for extremely volatile shipping rates.
Over the past five years, day rates for very large crude oil carriers (VLCCs),
for example, have swung from a low of about $15,000 per day to a peak
last November of $250,000 a day. Last year, the average daily price was
a healthy $96,000, but so far this year the average has been about half
that rate.
Industry analysts are divided about what the future holds, but many
expect freight rates to remain stable over the next few years. In its
latest report on global shipping, credit rating firm Standard &
Poor's gave stable ratings to 80% of the 27 shipping firms in its
universe, adding that it expects freight rates to remain above
historical averages in the coming months.
On the other hand, the bears insist that a pending slowdown in Chinese
demand for oil and other raw materials will send shipping rates lower.
However, so far China's robust economy has defied expectations. It
expanded +9.4% in the latest quarter, following a +9.5% increase the
prior period -- a pace that should help keep a floor on shipping rates.
A growing supply of ships -- the global tanker fleet is expected to grow
by about +25% in the next two to three years -- could also weigh on
freight rates. However, strong demand could help soak up this extra
fleet capacity, keeping prices stable.
In fact, freight rates have already bounced higher and are expected to
remain strong for the next 12 to 18 months, thanks to supply disruptions
caused by Hurricanes Katrina and Rita. As the domestic need for refined
products like gasoline, diesel, and jet fuel has strengthened, so too
has demand for tankers carrying these products into the U.S. That
increased demand has translated directly into higher prices.
Still, given the uncertain outlook of this highly cyclical industry,
investors may want to look carefully before jumping aboard.
Play It Safe
When investing in shipping stocks, you can save yourself a lot of
potential pain by first asking a few key questions about each
prospective investment. To begin, you might consider asking if the firm
operates on the spot market or under longer-term contracts. For
instance, shippers like Nordic American Tanker Shipping (NAT) that
operate on the spot market offer the most upside potential, but they're
also exposed to the greatest risk should rates begin to fall. For more
conservative investors, the safest plays among these highly volatile
stocks are firms that operate under longer-term charters.
Next, it is also a good idea to check out each stock's performance and
dividend history. For example, the share price of a highly volatile
stock like Frontline (FRO), the world's biggest crude oil shipper, has
gyrated wildly from a peak of $64.20 to a bottom of $35.89 over the past
52 weeks alone. Its dividend payments are equally unpredictable, with
$4.45 paid in 2003, $22.14 in 2004, and just $14.46 so far this year --
at irregular intervals.
By contrast, the various shipping companies that I will profile later in
this article offer some of the most stable dividends to be found in this
group. Each also sports a share price that has stayed within a fairly
narrow trading range, and all follow a managed dividend policy, with
regular quarterly distributions that have steadily increased in line
with earnings.
Of some 40 tanker stocks on the market, about one-third of them offer
above-average yields of 4%-plus. To view a table of these companies, as
well as an in-depth look at my three favorite shipping stocks, you'll
need to visit one of the links below...
Important
Note: To view the remainder of this article, in which
Carla Pasternak provides a table of more than a dozen high-yielding
shipping stocks, as well as an in-depth analysis of her three favorite
stocks from this list, you'll need to subscribe to our premium High-Yield
Investing newsletter. After you subscribe you'll receive
immediate access to the remainder of this article, as well as our
monthly High-Yield Investing newsletter and a host of
additional premium content. Please visit one of the following links to
continue...
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