Seaspan Corp. SSW has released their first quarter results and the news is a mixture of good and bad. On the good news side, revenues, distributable cash flow and net income are all improved from a year earlier. Also, the company has reached agreements to delay the completion of up to 15 of their new build vessels for up to 15 months if it is determined to be necessary.
The bad news (for income investors) is the decision to reduce the dividend from 47.5¢ per share to 10¢. The reason given for the reduction is to retain capital (up to $100 million per year from the reduction) in to company to help fund the purchase of new ships on order.
The dividend reduction does not seem like a bad decision. SSW appears to be a very well managed company with the ability to keep all of their container ships on time charter contracts with a stable customer base. They have been able to add to the fleet with contracts already in place for the new vessels. If they can continue to do this and not take on as much debt, the free cash flow will continue to grow.
The stock market is not giving any extra value for companies that are able to maintain there dividends. On the old payout rate Seaspan was yielding close to 18%. I would not be surprised the stock increases in value on the news of the retained earnings.
Seaspan slashes dividend
Seaspan Corporation – Seaspan Reports Financial Results for the Quarter Ended March 31, 2009.
Seaspan Corp. SSW has released their first quarter results and the news is a mixture of good and bad. On the good news side, revenues, distributable cash flow and net income are all improved from a year earlier. Also, the company has reached agreements to delay the completion of up to 15 of their new build vessels for up to 15 months if it is determined to be necessary.
The bad news (for income investors) is the decision to reduce the dividend from 47.5¢ per share to 10¢. The reason given for the reduction is to retain capital (up to $100 million per year from the reduction) in to company to help fund the purchase of new ships on order.
The dividend reduction does not seem like a bad decision. SSW appears to be a very well managed company with the ability to keep all of their container ships on time charter contracts with a stable customer base. They have been able to add to the fleet with contracts already in place for the new vessels. If they can continue to do this and not take on as much debt, the free cash flow will continue to grow.
The stock market is not giving any extra value for companies that are able to maintain there dividends. On the old payout rate Seaspan was yielding close to 18%. I would not be surprised the stock increases in value on the news of the retained earnings.