Seaspan: Shipping and Income

02/11/2016 10:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Our latest featured recommendation—headquartered in Hong Kong—is a major containership operator with 85 ships on the water, which amounts to 10% growth over last year, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

Seaspan (SSW) also has nine newbuild ships on the way, with five scheduled to deliver in 2016 and four in 2017.

With the global economy in slow growth mode, some investors have seen a threat to the containership business, which now has about 5% of its fleet idle.

With 14 of its Panamax ships up for contract renewal through the end of the year, Seaspan is potentially vulnerable to any decline in shipping rates.

But the company also has lots of protection, as around 80% of its revenue comes from long-term, fixed rate contracts.

Seaspan also has a line of credit of around $1 billion that it negotiated with the Chinese Export/Import Bank, which will allow it to exploit any opportunities in the market.

Investors were pleased by Seaspan’s quarter three report that featured earnings of 30 cents per share (analysts had expected 28 cents) and revenue of $213 million (consensus was $212). Earnings growth was 20% and revenue growth was 15%.

Seaspan’s quarter three dividend was 37.5 cents per share, which represents a yield of a little over 9% annually. The company’s ability to keep paying that attractive dividend is a big draw for investors.

SSW traded up from $4 during the Great Recession to $25 in late 2013, but has been in a general downtrend as worries about global growth rates keep it under pressure.

The stock has been selling off with most Chinese stocks, but found support at $14 in December and again this month.

Since the dividend is the big draw, SSW is buyable right here. And since it’s basically an income stock (with reasonable prospects for price appreciation if the economy picks up), you should set a loose stop.

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