Navios Maritime Holdings NM pays what in this sector would be considered a nominal dividend of 6¢ per share. From 2006 until the 2nd quarter of 2008 it was 7¢, then jumped to 9¢ for two quarters before being reduced to the current payout for the last two periods. The dividend appears to be somewhere around half of the net income. Cash flow when you figure in depreciation should be more than sufficient to cover the payout.

Navios Maritime Partners LP NMM is an MLP style spinoff from Navios Maritime. It appears that NMM was able to skim the cream off the dry bulk contracts from NM and pays a hefty dividend. The ships are on long term insured contracts. The current distribution of 40¢ per share puts the yield at 17%. NMM will be adding to the fleet and the payout should grow over time. I personally own shares of NMM and plan to buy more.

Nordic American Tanker NAT is a Suezmax only tanker company that has all of their vessels except one chartered in the spot market. The dividend will fluctuate each quarter based on the tanker spot rates and Nordic’s cash flow. In this century the quarterly distribution has varied between 32¢ and $1.88 per share. Over the last 20 quarters (5 years) NAT has paid out a total of $23.36 in dividends. The company has no debt and will pay a distribution in almost any foreseeable market condition. Tanker rates have been very low since early 2009 so the payouts for the next few quarters could be pretty slim. I own shares in NAT also.

Again, these three stocks show the different styles of earning revenues and paying them out to shareholders. More info on dividend paying shipping stocks will be up soon.

The news release linked above has pretty much slipped under the radar for the major investment websites. As of this morning Navios Maritime Partners NMM does not even have it linked on their website. I listened to the conference call and they referenced some slides, but I have not been able to find them on line, so I will put up my notes now.

NMM has contracted to add 4 new Capesize drybulk vessels to their fleet. The current 10 vessel fleet includes only one Capesize, so this is a greater than 50% increase in capacity. These vessels are to be delivered in the second half of 201o and early 2011. Also noted in the press release, the company has 3 previously contracted Capesize new build vessels coming online in the 2nd half of 2009.

The purchase price for the 4 new ships is $324 million, or about $81 million each. This seems like a pretty reasonable price for a new Capesize. NMM is borrowing $240 million at a margin of 2.25% (margin over what, I do not know) and will be issuing $165 million in mandatory convertible preferred stock to pay the balance and a portion of the cost of the 3 ships coming later this year.

The convertible preferred issue raises some questions: How much dilution when converted? The most likely outcome is that the preferred will be converted sometime after 3 years at $14 per share. This would result in 11.8 million new shares. It is possible some or all of the issue could convert at $10 per share. This would give 16.5 million new shares. The $10 mandatory conversion does not kick in until 10 years after issue. From my calculations there are currently about 24 million common units outstanding making the convertible preferred and 50% dilution but at a share price of at least $14. The preferred shares will be earning a 2% annual dividend, making them a very low cost financing until converted.

The 7 new Capesize vessels are already signed to long term contracts at attractive rates. In total they are projected to generate $77 million per year in EBIDTA or about $19 million per quarter. To compare, in the 1st quarter of 2009 Navios Maritime Partners generated $14.7 million in EBIDTA which resulted in $10.5 million of operating surplus. The current 40¢ dividend will “cost” about $9.5 million. So even with the dilution, NMM should be able to significantly increase the distribution over the next several years.

Because of their relationship with Navios Maritime Holdings [[NM]], Navios Maritime Partners has been able to cherry-pick the best new-build purchases and best long term charter contracts for their vessels. I currently have a position in NMM and plan to add more in the future.

Here are the payors 6 through 10 on my list. The stocks are listed in this order: Company and stock symbol, dividend earned on $1000 invested on 1/1/2009 (divide by 5 to get an annualized percentage) and the share price change since the beginning of the year.

• Navios Maritime Holdings, $37.92, +75%
• International Shipholding Corp. $39.00, -9.4%
• Safe Bulkers, $45.00, +16.8%
• Tsakos Energy Navigation, $45.90, +22.8%
• Euroseas, Ltd. $46.60, +38%

Of this group, Navios and Safe Bulkers are bulk carriers, Tsakos Energy Nav is in the tanker business and International Shipholding and Euroseas are mixed fleet carriers. ISH is a domestic U.S. carrier with a diversity of shipping business and I think it has suffered from the U.S. economic slowdown. It also appears to be distribution somewhat more than current free cash flow.

Otherwise, these companies with distribution yields in the 4% to 8% range have rewarded their share holders pretty well in the 1st half of 2009.

As I read through the press release for the 1st quarter earnings of Navios Maritime Holdings, a couple of figures really caught my eye. First, was the sharp drop in revenue from the first quarter of 2008. Revenue decreased 56% from $338 million to $147 million. Yet at the same time EBIDTA increased 12% from $38 million to $42.3 million. I thought I better listen to the conference call and take a closer look at some data to try and figure this out.

I believe their are two reasons why Navios Maritime is able to maintain their earnings level even when revenues drop significantly:

1. NM’s 44% stake plus the general partner incentives in Navios Maritime Partners L.P. (NMM) provide significant cash flow that falls directly to the bottom line. A look at the Q1 numbers for NMM show Navios Maritime receiving about $5.5 million in cash.
2. Navios’ fleet is a combination of about 25 owned vessels and a number of chartered in vessels. It appears than the company has the ability to increase or decrease the number of chartered in vessels they are using. The current quarter numbers show 10 chartered in vessels, while for the 1st quarter of 2008 the number was 16.

The ability to flex the size of their operating fleet gives Navios the security of having “all” of the vessels in the fleet earning a profitable rate.

Navios has good forward visibility of their revenue stream, but I do not see a lot of growth opportunity. Even when they have brought in additional chartered in vessels, it has not significantly increased the net earnings. At this point I am more inclined to hold NMM and collect the 40¢ per quarter dividend. The various Navios companies seem to be creatively well managed so go for the income stream (IMHO!).