Are you missing out on a 8.47 dividend yielder near it 52 week low?

Safe Bulkers (SB) is on sale.  Did you miss buying Safe Bulkers (SB) just 8.4 percent above its 52 week low?  Safe Bulkers closed at $7.22 per share today (+$0.14 from yesterday).  This high dividend stocks yield is currently 8.47 percent.  The $0.15 quarterly dividend is safe, it has average five year earning power of $1.90, and it balance sheet is good.
The present $0.15 quarterly dividend is safe even if you disregard the small amount Safe Bulkers revenue generated from several ships not on long term contracts.  Those ships are operating in the depressed spot market, but they are not idle.  Here is a summary of the company's contracted vessels over the next three years.  This information comes from Safe Bulkers latest quarterly earnings press release
     2011: 75% of Safe Bulkers 16 ship fleet is contracted.  25% of the fleet is operating in the spot market.
     2012: the contracted fleet ownership days drops to 59%.  39% would have to operate in the spot market unless SB finds some long-term contracts to enter into.
     2013: the contracted ownership days drops to a little more to 52%.  48% of the fleet is not under contract yet.
These number do not include the new-build addition of 14 new ships to the fleet between today and 2014.
How can I calculate estimated revenues for SB over the next few years?  Here is my formula.  I will multiple the number of ships in the fleet (16) times the number of days the fleet is contracted (365 x the contacted percentage) times the time charter equivalent from 2010 ($29,300).  Safe Bulkers time-charter equivalent was $29,300 per day per ship in 2010.  Think of this number as the average revenue number per ship per day.  Some ships are on contract for higher and some are on contract for lower, but $29,300 turns out to be the average for the company fleet overall.  This will give me the estimate revenue for each year for the ships already under contract.
     2011: $128.3 million revenue from contracted shipping
     2012: $100.9 million revenue from contracted shipping
     2013: $88.97 million revenue from contracted shipping
It costs $53.264 million dollars to operate and maintain the fleet of 16 ships per year using the cost rates from Safe Bulkers most recent quarterly income statement.  I'm including the ships operating on the spot market for costs, but I'm excluding them from the revenues to help prove how strong and safe SB's dividend is.
Estimated net income from contracted shipping
     2011: $75.036 million ($128.3 M – $53.264 M = $75.036)
     2012: $47.636 million
     2013: $35.706 million
Could Safe Bulkers pay its current dividend of $0.15 per quarter per share with just its contracted shipping over the next few years?  Yes, it could mostly pay the dividend over the next few years just with its currently contracted fleet.  Safe Bulkers had 71,633,284 shares outstanding as of May 2nd, 2011 (including the underwriters option to purchase 750,000 shares on top of the 70,883,284 outstanding).  It would cost SB $42.997 million dollars per year to pay its current dividend out to all those shares.  You can plainly see that most of the dividends can be easily covered with just the contracted ships in the fleet.  Keep in mind that annual interest expenses only amount to $6.8 million per year.
Take the numbers above and then factor in the fact that the ships in the spot market will be contributing to the revenue stream along with the new build ships.  You can see why Safe Bulkers dividend is safe.  Don't forget that the CEO's family owns 60% of the stock in the company.  They have a huge incentive to provide a sustainable dividend.
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Be seeing you!
Published in: on June 9, 2011 at 6:23 pm  Leave a Comment  

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