Investors seeking stocks with strong dividend yields would be well advised to go to sea and consider Capital Product Partners LP (NASDAQ:CPLP), a $285 million international transportation firm that owns and leases ships for transporting petroleum. It pays a whopping annual 14% yield, and has done so reliably for years.

CPLP specializes in small- and medium-sized ships to transport crude oil, gasoline, ethanol and other fuel-related products. Commercial tankers typically come in two varieties: large crude carriers and smaller refined product tankers. Crude tankers transport large amounts of unrefined oil from the point of extraction to refineries, while smaller product tankers generally transport the refined fuels such as gasoline and ethanol from the refineries to points closer to the end user.

CPLP charters its fleet out to customers under medium- to long-term fixed-rate time and bareboat contracts. Under time charters, firms like Petrobras (NYSE:PBR) of Brazil hire vessels for a set period of time, performing as many transports as they wish. Under bareboat charters, the lessor acts as the ship’s operator, taking on all responsibilities, including providing its own crew and ship maintenance.

In either case, CPLP has ship rates starting at $28,000 per day for its biggest ships, and it currently has an average of 5.8 years remaining on all charters.

Click to Enlarge What makes CPLP special is it has the youngest fleet in the tanker sector, with a fleet of 27 double-hull tankers averaging 3.6 years in age. It has contracts with several multinationals including Petrobras, BP Shipping Limited, Capital Maritime and others. The Greece-based firm was set up in early 2007 as a publicly traded master limited partnership for tax purposes but trades like any other U.S.-based stock.

The primary goal of CPLP and many of its peers is to operate as efficiently as possible while signing multi-year charters at favorable rates. This contracted quarterly revenue is what draws investors in, as it allows the firm to make large quarterly distributions.

CPLP has one of the highest distribution rates in the industry, currently at 93 cents per share. This translates to an annual yield of 14.3%, which is consistent with its average yield of just over 13% since going public.

The firm is in good hands, with chief executive Evangelos Marinakis having overseen the firm through the completion of 15 acquisitions since going public, including the recent merger with Crude Carriers Corp at the end of September. The share-only transaction made Crude Carriers a wholly owned subsidiary of CPLP and has vaulted it to the fifth-largest U.S.-listed tanker company.

Also, the name Evangelos Marinakis might ring a bell with international soccer fans, as the Greek businessman also is the president and majority owner of the well-known club Olympiacos FC.

CPLP’s balance sheet is strong with more than $55 million in cash, and a $350 million credit facility it was able to secure a few years ago. Additionally, based on the contracted charters in place, CPLP is generating more than the $16.5 million in cash flow needed to maintain its current quarterly distribution rate.

CPLP has been one of the best operators in the industry the last few years, improving gross margins for five consecutive years and operating margins the past three. Considering the aggressive acquisition strategy, the margin improvement is even more impressive.

The firm already has contracted out its vessels for close to 65% of 2012, and according to an analyst with Merrill Lynch, it shouldn’t have any problem signing charters for each of its two remaining tankers.

Although its headquarters are in Piraeus, the company’s customer base is global and CPLP shares trade on the Nasdaq exchange in dollars. Shares are starting to gain traction — up 14% in the last month. Buy CPLP as it appears to be one best small and fast-growing operators in the oil transportation business, and has a record of steadily paying a huge dividend.

Jon Markman operates the investment firm Markman Capital Insights.  He also writes a daily trading newsletter, Trader’s Advantage, and a long-term investment service, Strategic Advantage. Check out his Top Stock for 2012 here.