Dividend Yield: 6.6%
Market Cap: $367 million
As the name implies, Seacube Container Leasing (NYSE:BOX) is in the business of leasing and re-leasing containers on a diverse group of shipping lines. I like this pick because unlike some of the shippers that are exposed directly to the volatility in pricing, Seacube only leases the actual containers to third parties.
Of course, anyone who remembers the painful crash-and-burn in shipping stocks at the end of 2008 should know this investment is hardly risk-free. Infamous bulk carrier DryShips (NASDAQ:DRYS), which eliminated its dividend and remains down 97% from pre-crisis pricing, is proof positive of this.
But reports seem to indicate that dry-bulk rates are starting to rise once more after a horrible four-year slump. At least as measured by the Baltic Dry Index that measures commodity shipping costs, rates appear to be edging up after a 40% drop in the index through the end of October.
This is a very volatile play both on the share price side and the dividend. However, grabbing the tiger by the tail can pay off once in a while — Seacube is up 22% year-to-date, while DryShips is 13% in the red and other shipping stocks are looking even worse. Top that off with a dividend that has increased five quarters in a row, and you have a pretty compelling case for taking a stab on a shipping rebound. The company is soundly profitable and the dividend is sustainable at a roughly 60% payout ratio.
And most recently, the company just posted a 30% increase in its Q3 net income, with a nearly fully booked 97.9% utilization rate of its equipment. That bodes well for the future.
Also of note: BOX goes ex-dividend Wednesday, Dec. 5.