Historical dividend yield
The graph below shows the historical dividend yield for Navios Maritime Partners (NMM). It reached its highest point of 41% in 2008 when the broader market was doing very poorly, spooking investors after the Lehman Brothers crisis. For the rest of 2008–2009, the dividend yield peaked in the range of 20%–25%.
High current dividend yield
Currently, Navios Maritime Partners is trading at a dividend yield of 24% based on the dividends for the next four quarters. Although the yield appears to be too high, the most likely reason is the current state of the dry bulk market as a whole and investors’ fears that NMM might further cut or suspend its distributions. We think a cut or a suspension after the recent cut could be detrimental to the company.
The company’s management has been good at execution and managing distributions in the past, which gives additional confidence in the sustenance of distributions. This is especially true given the company’s ability to pay as it has surplus cash. Even after factoring in the time charter rates, which are below dry bulkers’ operating expenses, NMM’s coverage ratio is greater than 1.0x.
Until a few months ago, a high dividend yield of 20%–25% meant a potential distribution cut. However, since the company has already cut the distributions to a more sustainable level, it is likely to maintain this distribution even in the face of a prolonged dry bulk market. The long-term charters for containerships are also likely to provide some stability to NMM’s cash flows.