Navios Maritime Partners L.P. (NYSE: NMM)
Billions of tons of commodities are still shipped across the oceans and tankers are the only way to make this possible. Tanker stocks enjoyed a parabolic rise in 2006 and 2007 but were sold off sharply with the rest of the market last November. However; their profits continue to climb and many of the stocks in this sector are selling at single digit P/E ratios, while their earninga are growing at a double and triple digit rate.
The Baltic Dry Bulk Index [BDI] that tracks daily charter rates for commodities suppliers to ship their goods has started climbing again, fueled by strong demand. Tankers stocks have bounced up from their lows already, but they still look like good value compared to the broader market.
Most of them also pay very generous dividends - over 10%. The trend in shipping business will last as long as the BRIC ( Brazil, Russia, India & China) countries experience growth.
Demand is on the up again, so this sector should benefit in the coming months.
Our favourite in this peer group - bulk dry shipping, is Navios Maritime Partners L.P. (NYSE: NMM), a publicly traded master limited partnership formed by Navios Maritime Holdings Inc.
Navios is an owner and operator of Capesize and Panamax vessels. Navios is a company in a growing economy with no domestic competition. NMM has, unlike many shippers who recently cut dividends, increased quarterly returns to bring its annual yield to over 13%. The Company has also taken advantage of the current economic climate to make cheap additions to its fleet.
Ms. Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners, stated: "Our financial and operational results have been driven by our focus in the face of a turbulent market and the consistent implementation of our strategy. During a difficult period, we have been able to increase and maintain our distributions. We have also been able to access the capital markets through a successful, traditional "overnight" equity raise and to increase the size of our fleet. This accretive fundraising and acquisition demonstrated our continued ability to grow the company and our commitment to raise money in a shareholder friendly fashion."
There are few companies in the current economic climate that could announce for the quarter ended 30th June 2009:
24.0% increase in quarterly revenues to $22.2 million
93.2% increase in quarterly Operating Surplus to $11.4 million
25.6% increase in quarterly EBITDA to $15.2 million.
Navios Partners' charter-out contracts have been insured by an AA+ rated European Union governmental agency. The company has long term insured cash flow, because it has chartered out all ten of its vessels with a remaining average term of 4.4 years. This will provide a stable base of revenue and distributable cash flow. Navios Partners has currently contracted out 100% of available days for 2009, 100% for 2010 and 80% for 2011 generating revenues of $90.3 million, $96.1 million and $81.0 million, respectively. The average contractual daily charter-out rate for the fleet is $25,887, $26,343 and $27,730 for 2009, 2010 and 2011, respectively. This gives investors who are looking for stable income and the potential for capital appreciation, a good deal of certainty for the next 2 years at least.
Navios is currently trading on a P/E of 8.10 and sports a yield of 13.7% The cash distribution for the second quarter of 2009 was $0.40 per unit. This was a nice increase from 2008.
This is not a stock that will appeal to all investors, but if you are looking for a high yield that should be relatively stable over the next few years, then this is worth consideration. Navios has a good track record of consistently growing dividends even during turbulent market conditions.
Buy Navios Maritime Partners L.P. (NYSE: NMM) up to $14 and enjoy the high dividends.