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Navios’s Dividend Yield Remains Attractive in Dry Bulk Space

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Dividend distribution

Safe Bulkers (SB) has reduced its dividend amounts over the years as earnings declined and long-term contracts expired. In 1Q15, it reduced its dividend to $0.01 per share. This was its third consecutive dividend cut. It maintained this dividend level in 2Q15.

During the latest earnings call, management mentioned that it will continue to distribute dividend, taking into account market conditions and prospects going forward.

Diana Shipping (DSX) hasn’t paid dividends since 2008. There were no talks about reintroducing dividends in its latest earnings call.

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DryShips (DRYS) also doesn’t pay dividends. Navios Holdings (NM) has been paying a quarterly dividend of $0.06 per share. NM’s management was asked a question about alternative routes for returning cash to shareholders, such as buybacks. Management commented that the company is quite open regarding that, and in the last ten years, it has returned $365 million to shareholders. Of that, $100 million is through buybacks.

NMM committed to stable dividends

As a limited partnership, Navios Maritime Partners (NMM) tries to keep distributions stable. In its 2Q15 earnings call, management reiterated its commitment to a minimum distribution of $1.77 through 2016. This is a 26.4% increase in annual distribution per unit since its inception in 2007.

Navios management said the company is prepared to increase distribution when the shipping market stabilizes. The company has diversified into containership vessels in order to keep distributions stable in the face of weak dry bulk industry fundamentals.

Dividend yields

The above graph shows dividend yields for five companies. Navios Holdings and Safe Bulkers have dividend yields of 8.8% and 1.3%, respectively. In contrast, NMM has an attractive 21% dividend yield. DryShips and Diana haven’t paid dividends in a long time.

The Guggenheim Shipping ETF (SEA) has 2% holdings in NM. Investors interested in a broader industry exposure should consider the SPDR S&P 500 ETF (SPY).

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