Barron's Is Bullish On Diana Shipping (DSX) And Genco Shipping (GNK)
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Barron's had an column last night discussing a couple dry bulk shipping stocks. Barron's says that although dry bulk shipping stocks hit a tougher market late last year, it thinks 2008 could be a good year for stocks like Diana Shipping (NYSE: DSX) and Genco Shipping (NYSE: GNK).
Barron's said Diana Shipping and Genco Shipping & Trading are two of the best dry bulk shipping stocks. Both shippers are scheduled to acquire new vessels and will have the opportunity to lock in higher contract rates this year.
Diana and Genco each have fallen about 30% after roughly tripling from their lows in early 2007. Currently, Diana has a 7.4% dividend yield and Genco's is 4.8%. Barron's noted these stocks trade at relatively modest multiples: Diana trades at 10.4 times forward earnings while Genco trades only at eight times expected earnings.
Barron's said, "demand for hauling boatloads of iron ore, coal and agricultural products to China and other markets continues to be robust." However, from my sources, I hear China is slowing down its purchases of commodities right now.
Genco currently has 22 vessels and is adding another 11 through the third quarter of 2009 for total-shipping capacity of 2.7 million deadweight tonnage. Diana has 18 dry-bulk carriers with more than two million in deadweight tonnage.
Lastly, the capital structures of Genco and Diana are quite different.
Diana pays out its free cash flow (FCF) to shareholders through dividends. It funds new acquisitions by issuing stock at prices at a premium to NAV of the ships it is buying. Genco uses debt to make acquisitions and has a 50%-60% debt-to-capital ratio.
Bear Stearns says it sees better upside for Genco in part because of two new profit-sharing charters with Cargill. But Barron's said both should do well because of their attractive valuations, high dividend yields and new charters for '08.
JR
Barron's said Diana Shipping and Genco Shipping & Trading are two of the best dry bulk shipping stocks. Both shippers are scheduled to acquire new vessels and will have the opportunity to lock in higher contract rates this year.
Diana and Genco each have fallen about 30% after roughly tripling from their lows in early 2007. Currently, Diana has a 7.4% dividend yield and Genco's is 4.8%. Barron's noted these stocks trade at relatively modest multiples: Diana trades at 10.4 times forward earnings while Genco trades only at eight times expected earnings.
Barron's said, "demand for hauling boatloads of iron ore, coal and agricultural products to China and other markets continues to be robust." However, from my sources, I hear China is slowing down its purchases of commodities right now.
Genco currently has 22 vessels and is adding another 11 through the third quarter of 2009 for total-shipping capacity of 2.7 million deadweight tonnage. Diana has 18 dry-bulk carriers with more than two million in deadweight tonnage.
Lastly, the capital structures of Genco and Diana are quite different.
Diana pays out its free cash flow (FCF) to shareholders through dividends. It funds new acquisitions by issuing stock at prices at a premium to NAV of the ships it is buying. Genco uses debt to make acquisitions and has a 50%-60% debt-to-capital ratio.
Bear Stearns says it sees better upside for Genco in part because of two new profit-sharing charters with Cargill. But Barron's said both should do well because of their attractive valuations, high dividend yields and new charters for '08.
JR
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