Cool Dood said:
Couple of questions: EGLE payout ratio is 180% -- is that just some anomaly, or is there an explanation?
The accounting forces the reported profits to be much lower than the cash flow. The dividends are driven by cash flow, not by taking on additional debt. The typical shady company's "high-yield" strategy involves loading up on debt (or draining cash reserves) to sustain an eye-popping dividend. (Like, oh, say, GM before they whacked their dividend.) EGLE (so far) is using cash flow (not debt or reserves) to pay the dividend.
Cool Dood said:
What are the significant risks? You'd think that with a dividend that high, people would flood into it and drive the price higher? Wouldn't there pretty much have to be some large risks associated for people not to switch out of, say, corporate bonds and into that?
1. Only been public for 16 months, not followed by very many analysts. People are blissfully ignorant.
2. Thinly traded (not many mutual funds or institutional investors).
3. Small-cap stock (although that's growing).
4. Gotta have faith in management to be able to run a shipping schedule and not get nailed by maintenance or drydock issues.
5. Chartered in the Marshall Islands, which for some reason gives investors pause. The company's business address is actually in NYC.
6. Many of the shares are locked up in the hands of the VCs who financed the company before its IPO. They're holding onto those shares (for a good reason!) but dumping them onto a thinly-traded market could severly depress the share price. That also concerns mutual funds & institutions.
7. Many dry-bulk (not container) shippers go through a cyclic season that drastically affects their expected cash flow (profits). They're also using older ships. The whole concept of dry-bulk shipping has taken on the image of rusty freighters limping between ports hoping to find something to ship to another port before they can't pay their crew or their fuel bill. EGLE, by contrast, has been chartering out their services way in advance (less fluctuation) and giving value for that with a modern fleet of bigger ships able to crane their own loads. (Nearly a quarter of their ports of call can't offload the ships as quickly as the ships can offload themselves.) Yeah, it's more expensive up front for the shipper, but their unit costs & port fees are much lower. EGLE is bottom-fishing in places like China, India, & southeast Asia that most of us never knew existed, let alone saw as a profit opportunity.
I'm up almost 6% since January on a cost basis of $12.46 (currently trading at $13.14) and re-investing shares. Looking at Brewer's posts, I see he first mentioned EGLE last July.