First Look at 12% Dividend Yielder Capital Product Partners (CPLP)

What they do – Based in Piraeus, Greece, Capital Product Partners owns and leases small to medium-sized ships for the transportation of refined oil products. These rental contracts are typically long-term and range from three to 10 years. The company outsources vessel management to parent company Capital Maritime. Spun out from Capital Maritime in 2007, ownership in Capital Product Partners represents a limited-partnership stake.

Capital Product Partners LP. is an international tanker company. The Company is engaged the seaborne transportation services of crude oil and refined petroleum products, edible oils and soft chemicals, by chartering its vessels under medium to long-term time and bareboat charters. Its fleet consisted of 27 modern high specification vessels with an average age of approximately 4.0 years as of January 31, 2012, including two very large crude carrier tankers, four Suezmax crude oil tankers, 18 modern MR tankers. As of December 31, 2011, it charter 24 of our 27 vessels under medium to long-term time and bareboat charters to charterers, such as BP Shipping Limited, Petroleo Brasileiro S.A., Cosco Bulk Carrier Co. Ltd., Capital Maritime and subsidiaries of Overseas Shipholding Group Inc. On June 9, 2011, the Company acquired Patroklos Marine Corp.

Preferred stock: This company has a small amount of preferred stock.  In 2010, they paid $359K out of $17,936K (about 2%) in preferred dividends.  In 2011, they paid $1,742K out of $87,120K (about 1.9%) in preferred dividends.  The preferred does not threaten the common stock dividend at this time.

Bonds: no bonds.

DIVIDEND RECORD: CPLPs grew its dividend from $0.36 quarterly in 2007 to $0.41 in 2010 Q1.  Boom! Then they cut the dividend in almost half and it been there ever since.

Dividend: $0.23 quarterly

Dividend yield: 12.12%  ($0.92 annual dividend / $7.59 share price)

Dividend payout: 51.6% using 2011 reported unadjusted earnings of $1.78 –OR- 153% using average adjusted earning power of $0.60 per share

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EARNING POWER: $0.60 per share @ 70.79 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

2007

$0.95

$27.8 M

22.3 M

$0.39

2008

$1.54

$50.7 M

24.2 M

$0.72

2009

$1.15

$29.2 M

24.8 M

$0.41

2010

$0.54

$17.5 M

32.4 M

$0.25

2011

$1.78

$85.4 M

47.1 M

$1.21

Six year average adjusted earnings per share is $0.60

Consider contrarian buying below $4.80 (8 times average adjusted EPS)

Consider value buying below $7.20 (12 times average adjusted EPS)

Capital Product Partners (CPLP) is currently trading at 12.65 times average adjusted EPS.  This is stock is priced for investment.

Consider speculative selling above $12.00 (20 times average adjusted EPS)

BALANCE SHEET – Nice equity growth.  The company doesn’t have much in the way of current assets to cover current liabilities.  Great price to book value ratio.

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Book value per share: $7.30

Price to book value ratio: 1.03 (under 1.0 is good)

Current ratio: 1.05 latest quarter (over 2.0 is good)

Quick ratio: 0.94 latest quarter (over 1.0 is good)

Debt to equity ratio: 1.18 (lower is better)

Percentage of total assets in plant, property, and equipment: 89.78% (the higher the better)

CONCLUSION – Capital Product Partners (CPLP) is a high dividend stock yielding over 12%.  However, I’m a little troubled by the high dividend payout ratio using the average adjusted earning power.  You need to really dig into the annual reports and quarterly reports to determine if its earning power will grow enough to protect the current dividend.  Remember that CPLP cut its dividend almost in half in 2010.  I’m always leery of dividend cutters.   It is priced for investment at barely over 12 times average adjusted earning power and the stock was contrarian cheap as recently as August 2010.  The only ding on the balance sheet is the low current ratio.  The return of the worldwide recession will drop CPLPs price.  You will have another opportunity to buy this stock between $7.20 to $4.80.  Wait for it.  Read the annuals and quarterly reports while you are waiting.  I haven’t read them yet, but I will: http://www.capitalpplp.com/sec.cfm

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http://stockcharts.com/c-sc/sc?s=CPLP&p=W&b=5&g=0&i=p59203526393&r=2148

DISCLOSURE – I don’t own Capital Product Partners (CPLP).

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Published in: on March 13, 2012 at 11:28 am  Leave a Comment  

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