Navios: Big Yield in Bulk

12/18/2013 4:05 pm EST

Focus: MLPS

Ari Charney

Analyst and Associate Editor, Canadian Edge and Personal Finance

Investors in our latest featured recommendation have been on a wild ride the past few years, as the dry bulk shipping market has suffered a steep contraction, recalls Ari Charney, income expert and editor of Big Yield Hunting.

Following their trough amid the Great Recession, unit prices for Navios Maritime Partners (NMM) climbed as high as $21.38 in early 2011, falling as low as $11.31 later that year, and have essentially traded in a range between $14 per unit and $16 per unit since then.

While a number of aggressive investors had been enticed by the master limited partnership's double-digit yield during that time, we had been leery of Navios' near-term prospects and the sustainability of its distribution.

And with a number of long-term charters expiring next year, with new charters likely at substantially lower rates, a distribution cut was a distinct possibility.

But the MLP's shrewd management team engineered a transformative acquisition of five container vessels that, according to Wells Fargo analysts, should mean the distribution is largely secure through the end of 2015.

Management, itself, has committed to the current $0.4425 quarterly distribution, which sums to $1.77 annually, through 2014. At recent prices, the units yield 10.8%.

This MLP is a bit riskier than our usual fare because it operates in the dry bulk shipping market, transporting commodities such as iron ore, coal, grain, and fertilizer, which makes it extraordinarily sensitive to changes in the global economy.

And, obviously, there's substantial uncertainty at present about when the US and other developed-world economies will finally produce a solid rebound.

Even if the dry bulk shipping market suffers further headwinds in the near term, we're being amply compensated to await a rebound over the medium term.

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