Safe Harbor: 8 Shipping Plays on the 7 Seas

When global products, from manufactured goods to LNG, need to get from point A to point B, they usually require transportation via ships. And in the current environment of rising rates and global supply chain problems, it is little surprise that shipping rates have been near historical highs. Several leading investment experts and contributors to MoneyShow.com highlight their favorite shipping sector stocks poised to benefit from these trends. Tom Hutchinson, Cabot Dividend Investor Global Ship Lease owns and charters container ships under fixed-rate charters to container shipping companies. The company deals in mid-size and smaller container ships, which are the workhorses of the of the main global containerized trade routes. Shipping rates have tripled since the end of 2020 and have risen six-fold since before the pandemic. While rates peaked last October, container shipping rates remain at very elevated levels. Container rates have stayed high because demand for containers is greater and supply is more limited than for other types of shipping. And the supply/demand dynamic is likely to stay favorable for some time. Global has consistently grown earnings and revenues over the last three years. The shipper also grew revenues and earnings through the pandemic. Earnings per share grew from $1.48 in 2019, to $2.09 in 2020, to $4.65 in 2021. And stellar growth should continue. The biggest reason internally is that Global has been growing its fleet. In fact, Global grew its fleet by more than 50% in 2021 alone. Those ships and charters will be accretive to earnings this year. GSL currently yields a strong 4.4% at the current price. The company initiated a dividend in January 2021. So, it doesn't have a track record. But there are some very encouraging things. Global just raised the next dividend by 50% -- to $0.375 per quarter from $0.25. It is also triple the initial dividend. And that dividend is well supported with just a 16% payout ratio, with a lot of room to grow. Nate Pile, Little River Investment Guide A new recommendation for our model portfolio, Grindrod Shipping Holdings Ltd. , is an intriguing situation in the current environment; it is showing good relative strength based on the favorable tailwinds that its business is experiencing. Grindrod is a 112-year-old shipping company based in Singapore that operates a fleet of dry bulk carriers that can transport a wide variety of bulk commodities, including ores, coals, grains, forestry and steel products, as well as fertilizers; in addition, it operates a tanker that can carry a variety of petroleum products and vegetable oils. Given all the forces currently at play when it comes to global supply chains, shipping stocks have been acting well lately, and shares of GRIN have been tracing out what I consider to be a quite bullish pattern for a while now, and while it is possible that the tide may soon turn on the sector, I am taking advantage of the current situation to start a position. Marty Fridson, Forbes/Fridson Income Securities Investor Triton International, Ltd. is the world's largest lessor of intermodal containers. TRTN is engaged in the acquisition, leasing, and sale of various types of intermodal transportation equipment to shipping lines, as well as freight forwarding companies. The company's extensive operating infrastructure allows it to deliver best-in-class container supply capabilities to its customers. TRTN has a fleet of almost 7.0 million twenty-foot equivalent containers, across a global network. The company offers its customers access to its containers through approximately 410 third-party owned container depot facilities across 46 countries. We recommend the Triton International, Ltd.; 5.75% Fixed Rate, Series E, Cumulative Perpetual TRTN-E. This cumulative preferred issue may be redeemed on 09/16/26, or any time thereafter, at par plus all accumulated and unpaid dividends. TRTN's preferred also has Change of Control (COC) language, prior to the issue's initial call date. The economy's reopening, inflation pressures, and war in Eastern Europe contributing to considerably higher leasing costs for containers. Look for revenue and earnings to gain further momentum in 2022. This investment is suitable for medium- to high-risk taxable portfolios. Dividends are taxed at the lower 15%-20% rate. Our recommendation on the 5.75% preferred is long-term in nature. The company's financials remain in satisfactory shape from the standpoint of preferred holders, with the latest earnings exceeding expectations and with the company reaffirming its common dividend at the previous level. Buy at $25.00 or lower for a 5.75% current yield and a 5.75% yield to call. Bryan Perry, Cash Machine One of the larger secular themes that is playing out now is the rising global demand for liquified natural gas (LNG) to replace coal and Russian LNG to Europe. Flex LNG Ltd. is a pure play on the ocean-going transport of LNG from the United States and other-LNG producing terminals around the world to end markets. Based in Bermuda under Norwegian management, Flex LNG Ltd. is an LNG shipping company with a fleet of 13 fuel efficient, fifth-generation LNG carriers. Its carriers were built between 2018 and 2021. This is a very young fleet by industry standards. The company is set to flourish in revenues, earnings and dividend payouts for at least the next three years, offering investors a very visible investment proposition. Flex reported fourth-quarter 2021 results that proved the company is on a powerful uptrend for its business. (The next earnings date is expected on May 20th.) Flex management declared a $0.75 per share dividend that equates to $3.00/share per year. The stock yields 10.35%, making it an excellent addition in our high risk portfolio. Let's set sail with this pure play in the LNG space and look for rising dividend payouts and capital appreciation. Buy Flex LNG Ltd. under $32. ZIM Integrated Shipping Services , headquartered in Israel, is a specialized global shipping liner, which profits by shipping containerized cargoes around the world, particularly on routes that are less popular with the larger shipping line operators. Even though there is huge political pressure to tout the easing of supply chain bottlenecks, hard evidence would suggest otherwise. ZIM's model is primarily asset-light, meaning that the company leases the entirety of its fleet and a large portion of its container boxes. Since ZIM controls almost all of its ships through leases with staggered quarterly expirations, they can be nimble operators and add new vessels if market conditions firm up, or they can allow leases to expire and roll off if market conditions soften -- again, quarter by quarter. 2022 is shaping up to what will be another banner year for ZIM and for the overall container shipping industry. ZIM is forecast to earn $36 per share this year and has raised its total dividend payout to $19.50 per share, implying a yield of 27.4%. Shipping stocks are volatile, and that is why this recommendation belongs in our high-risk portfolio. Gavin Graham, The Income Investor CK Hutchison Holdings (CKHUY) is the holding company for the diversified interests of Hong Kong's wealthiest man, Li Ka Shing. It owns the world's leading ports network, with interests in six of the 10 busiest container ports in the world. This is achieved through its 80% interest in the Hutchison Ports business and its 30% interest in the HPH Trust, which together have interests in 52 ports in 26 countries with 291 berths. These handled 88 million twenty-foot equivalent units (TEUs) last year. CKH is very well diversified both geographically and by type of business, with operations in retail, infrastructure and telecom. It gives investors exposure to both relatively stable, if slow-growth businesses like power and water companies and drugstore chains, along with more economically sensitive operations such as container ports and mobile phone networks. Despite operating in areas that were amongst the worst affected by the pandemic lockdowns, CKH has managed to grow its revenues and earnings over the last couple of years. CKH announced a final 2021 dividend of $0.238, an increase of 9% on 2020. Combined with the $0.102 interim payment, that gave a total of $0.341, a 15% increase for the year, equivalent to a 4.79% yield. As an ADR, the dividend will be subject to foreign withholding tax. CKH was recently selling at less than 6.5 times price/earnings ratio and 0.4 times price/book ratio. The stock is a very reasonably priced way to gain exposure to attractive sectors, supported by a sound balance sheet (30% debt/capital) and a rising dividend. Buy now for an attractive yield and a potential re-rating. Mike Cintolo, Cabot Top Ten Trader Natural gas prices are soaring due to a global energy supply crunch (particularly in Europe) and higher demand for cleaner fuels. This is where Golar LNG enters the picture. The firm operates marine infrastructure that turns natural gas into liquified natural gas (LNG), and vice-versa, in a process called re-gassification. The company's flagship, Hilli, was previously an LNG carrier that was converted to a floating liquefication and storage facility -- the first of its kind in the world. Golar's floating plant was first used by the nation of Cameroon to export LNG from one of its gas fields in 2018, and the vessel has since become the company's top-performing ship. Golar's technology allows energy firms to explore smaller gas fields that aren't large enough to warrant installing a major LNG terminal. The attraction here is that Golar plans to expand its floating LNG fleet, starting with Golar Gimi, scheduled to come on line in 2023, which already has secured a 20-year contract with oil/gas giant BP . Wall Street sees major potential in its technology as a way for countries to access more gas. While near-term results should be relatively flat, investors are buying the future, with sales picking up steam next year and earnings soaring by 2024. Rich Moroney, Upside Matson provides freight-transportation and logistics services across oceans for customers in Alaska, Hawaii, California, Guam, China, and Japan. Despite supply-chain headwinds in China and congestion in U.S. ports, Matson's results are benefiting from strong demand for consumer goods. Management expects robust demand to carry through to at least its October peak season. Yielding 1.4%, Matson has raised its quarterly dividend in each of the past eight years. Matson's most recent dividend increase was a 30% hike, announced last June. The dividend consumes just 6% of trailing 12-month earnings, leaving flexibility for more big hikes in coming years. For the March quarter, Matson reported per-share earnings of $8.23, up from $1.99. In April, the company said per-share earnings would range from $8.00 to $8.20. Revenue hit $1.17 billion, up 66%. Matson said container volumes in China increased 13%. The stock is rated Best Buy.

Safe Harbor: 8 Shipping Plays on the 7 Seas

From cargo to ports, investment experts select their favorite shipping sector stocks poised to benefit from current trends.

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