K-Sea Transportation KSP decided to conserve cash and is currently not paying a dividend. I have removed the stock from my dividend paying list.

Horizon Lines [[HRZ]] reduced the regular payout from 11¢ per share to 6¢.

It is probably not a coincidence that these two stocks are among the worst performing shipping stocks so far this year with K-Sea the worst, down over 20%.

Capital Product Partners LP CPLP paid a monster 41¢ dividend (4% of the stock value)  in February for the 4th quarter of 2009 but announced the target distribution rate of 90¢ per share (22.5¢ per quarter) for 2010. This still leave a better than 10% distribution rate if management can follow through.

There are currently 19 shipping stocks with an active dividend payment policy. The payouts declared or paid in the first 3 months of 2010 equate to an annual yield of just over 7%.

HONG KONG, CHINA, Jan 22, 2010 (Marketwire via COMTEX News Network) — Seaspan Corporation (NYSE:SSW) announced today that the Company’s Board of Directors has declared a quarterly dividend of $0.10 per share for the three months ended December 31, 2009. The dividend will be paid on February 12, 2010 to all shareholders of record as of February 1, 2010.

Source: from the Seaspan press release

The blog post linked above from Reuters reporter Felix Salmon discusses the large amount of bank debt collateralized by ships. With the current glut of ship inventory, if a company goes under the amount the bank realizes from the sale of assets may not cover the debt.

For shippers, I think this means the less financially secure will have a tougher time obtaining attractive financing for purchases. It may also lead to a more rapid scrapping of older ships.

I listened to the Seaspan investor conference this morning and came away thinking that, as I have for some time, here is a well run company in a tough sector and tough times. I was surprised to see the stock take a drubbing this morning…now down sixty cents or over 8%. Am I not hearing something?

Good question. I took a look through the earnings press release and I see a couple of items that give one pause. A couple of their customers are going through some financial difficulties. Payments are still being made on the vessels but some restucturing is under way. The other item I see with both SSW and near twin Danaos, DAC, are the big new build order books coming into a container market that is 25% off where it was 18 months ago.

These companies seem well managed and continue to have contracts for all of the new build ships. As an investor, at this point you have to ask yourself if you believe that management can pull the company through the recession in one-piece. If yes, this stock will probably triple in the next couple of years. If no, their debt wll bury them. Owning container ship stocks in this economy is a bet on an economic recovery.

Horizon Lines [[HRZ]] is primarily a U.S. flagged container carrier serving Alaska, Hawaii and Puerto Rico from mainland U.S. ports. The earnings release show the company maintaining a level of profitabilityin their shipping business in a very soft economic market. The opening lines of the press release pretty much state the condition of their market:

Container Volumes Down 9.8%; Container Rates Net of Fuel up 2.5%

At this point Horizon is a way to participate in the retail recovery of the U.S. That recovery seems to still be a few quarters or more in the future.