19.4%-Yielding Diana Shipping Stock Reports Q3 EPS Growth of 129%
Diana Shipping Inc Inks New Time Charter Contracts
Many investors shy away from marine shipping stocks because the industry is susceptible to swings in the economic cycle. At the same time, companies like Diana Shipping Inc (NYSE:DSX) sign multiyear contracts that its customers need to pay regardless of the economic situation.
While fears of an upcoming recession might be weighing down investor sentiment, Diana Shipping has been reporting consistently strong financial results, which has been helping juice its ultra-high-yield dividends. That’s why it’s a great time for investors—especially dividend hogs—to take a look at DSX stock.
Diana Shipping provides global marine shipping services, primarily for short-term to medium-term time charters. Its vessels carry a range of dry bulk products, including iron ore, coal, and grain. (Source: “About Us,” Diana Shipping Inc, last accessed December 19, 2022.)
The company’s fleet consists of 41 dry bulk vessels: four Newcastlemax, five Post-Panamax, six Kamsarmax, seven Ultramax, eight Panamax, and 11 Capesize ships. Their combined carrying capacity is approximately 4.8 million deadweight tonnage (dwt). Their charter periods have a weighted average of 10.2 years.
Diana Shipping Inc expects to take delivery of two additional Ultramax dry bulk vessels in the fourth quarter. It’s going to need those extra ships to accommodate the rising demand for dry bulk shipping.
In November, Diana Shipping announced that it had entered a time charter contract for one of its Kamsarmax dry vessels. The gross charter rate for the contract is $15,000 per day, minus a five-percent commission to third parties. The minimum period of the charter ends April 20, 2024 and the maximum period ends June 28 of the same year. The company expects the contract to generate about $7.6 million of gross revenue for the minimum-scheduled period of the time charter. (Source: “Diana Shipping Inc. Announces Time Charter Contract for m/v Myrsini,” Diana Shipping Inc, November 21, 2022.)
On December 12, Diana Shipping announced that it had extended its time charter contract with SwissMarine Pte Ltd., Singapore for one of its Post-Panamax dry bulk vessels. (Source: “Diana Shipping Inc. Announces Direct Continuation of Time Charter Contract for m/v Alcmene with SwissMarine,” Diana Shipping Inc, December 12, 2022.)
The gross charter rate for this contract is $13,000 per day, minus a five percent commission paid to third parties. The minimum period of the charter ends January 10, 2024 and the maximum period ends March 25 of the same year. This new charter period is expected to start on December 27 and generate about $4.7 million of gross revenue for the minimum-scheduled period of the time charter.
Net Income, Earnings, & Time Charter Revenues Soar in Q3
Diana Shipping’s new time charters should help the company continue building on its impressive financial growth.
For the third quarter, management reported net income of $31.7 million, up by 116% from $14.7 million, or $0.17 per share, in the same period of 2021. The company also reported third-quarter 2022 earnings of $0.39 per share, up by 129% from $0.17 in the same quarter of 2021. The company’s Q3 2022 time charter revenues went up by approximately 29% to $73.8 million, compared to $57.3 million in the same quarter of 2021. (Source: “Diana Shipping Inc. Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2022,” Diana Shipping Inc, November 17, 2022.)
In the first nine months of 2022, Diana Shipping Inc’s net income was $93.4 million, up by 475% over the $16.3 million in the first nine months of 2021. The company’s time charter revenues in the first nine months of 2022 were $214.3 million, up by 47.3% from $145.4 million in the same period of 2021.
Diana Shipping Inc Declares Quarterly Distribution of $0.175
Diana Shipping recently declared a cash dividend of $0.175 per share, for a yield of 19.4%.
The company’s payout ratio is just 52.6%, giving management plenty of financial room to raise Diana Shipping stock’s payout over the coming quarters. Admittedly, DSX stock’s dividend has been unstable over the years. Diana Shipping Inc paid dividends on its common shares between 2005 and 2008 before suspending the payouts. During that period, its quarterly payout increased from $0.08 per share to $0.95 per share.
Diana Shipping suspended its dividends in order to take advantage of future market opportunities, not because the company was doing poorly. Suspending the payouts helped the company enhance its financial flexibility and grow its business.
Between 2005 (when Diana Shipping Inc went public) and 2008, the company produced a total annualized rate of returns to shareholders of more than 27%. This compares very favorably to the returns from other dry bulk shipping stocks, as well as from the S&P 500 over the same period.
Since then, Diana Shipping Inc has doubled its vessel fleet size and significantly grown its earnings. This allowed the company to resume its distribution in the third quarter of 2021.
Diana Shipping stock’s distribution fluctuates based on the company’s earnings, economic conditions, and investor sentiment. As such, 2022 has been a bumpy ride for DSX stock. This has actually been good for day traders or investors who bought on dips.
Chart courtesy of StockCharts.com
Despite its volatility, Diana Shipping stock continues to outpace the broader market. It’s up by 10.5% year-to-date and 12.5% year-over-year. Big gains, but shares of Diana Shipping Inc have additional room to run. Analysts have provided a 12-month share-price forecast of $5.50 to $6.00, which points to gains in the range of 50% to 64%.
The Lowdown on Diana Shipping Stock
Diana Shipping Inc is an excellent marine shipping company that has been growing its fleet and earnings. In the third quarter, the company continued its trend of high earnings and revenue growth.
Diana Shipping’s long-term contracts insulate it from economic headwinds that negatively affect companies in other industries. Right now, the market conditions for the company are positive. This should allow it to continue reporting robust free cash flow, which should mean higher quarterly distributions from DSX stock.