Global Ship Lease Inc. (GSL) is a container ship owner that leases to shipping companies under long-term charters. The container ship market is seeing more consistent demand and is more resilient than other sectors, and the stock has a stronger track record than its peers, highlights Tom Hutchinson, editor of Cabot Income Advisor.
Global Ship Lease owns and charters container ships under fixed-rate, long-term leases to container shipping companies. The company deals in midsize and smaller container ships, the workhorses of the global trade routes. Global is an international company based in the Marshall Islands, with offices in London and Athens.
Global Ship Lease Inc. (GSL)
Not only does Global operate in the resilient containership segment, but it also focuses on the sweet spot in that area. The smaller, sub-10,000 TEU (20-foot equivalent unit containers) ships dominate the world’s non-mainline routes, which account for roughly 75% of global containerized volume. And demand is growing for these “operationally flexible” ships.
Currently, 71 of Global's 75 ships are these smaller ones. It’s also worth noting that most of the ships are “high-reefer” (refrigerated), the fastest-growing, most-lucrative part of the market. Global leases these high-demand workhorses of the global fleet with long-term contracts that provide predictable revenue that shields the company from the gyrations of shipping rates.
One of the best features is the dividend. The quarterly payout is currently 62.5 cents per share, which translates to $2.50 annually for a stellar 5.4% yield at the stock's recent price. It’s both lucrative and encouraging that the company has raised the quarterly payout consistently over the past several years. Meanwhile, the company still has a modest payout ratio of just 26%, compared to the industry average of 60%.
Recommended Action: Buy GSL.
