Star Bulk Q2 Preview: Rich Payouts Ahead As TCE Rates Remain High

seekingalpha2024-07-08

SBLK's investment thesis remains compelling with rich forward dividend yields of 12%, as the EU commences their rate cuts and the US likely not far behind. On the other hand, the management ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nStar Bulk Q2 Preview: Rich Payouts Ahead As TCE Rates Remain High\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-08 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4702715-star-bulk-q2-preview-rich-payouts-ahead-as-tce-rates-remain-high><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SBLK's investment thesis remains compelling with rich forward dividend yields of 12%, as the EU commences their rate cuts and the US likely not far behind.\n        On the other hand, the management ...</p>\n\n<a href=\"https://seekingalpha.com/article/4702715-star-bulk-q2-preview-rich-payouts-ahead-as-tce-rates-remain-high\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"EGLE","symbol_name":"伊格尔散货航运","start_time":0,"source_url":"https://seekingalpha.com/article/4702715-star-bulk-q2-preview-rich-payouts-ahead-as-tce-rates-remain-high","article_id":"2449108708","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/172236390/image_172236390.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2449108708","pubTimestamp":1720443600,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SBLK's investment thesis remains compelling with rich forward dividend yields of 12%, as the EU commences their rate cuts and the US likely not far behind.On the other hand, the management has guided higher dry docking expenses, with it potentially being a bottom-line drag while impacting the FQ2'24 variable dividend payouts.Even so, we believe that FQ3'24 is likely bringing forth higher TCE spot rates, thanks to the unusually robust iron ore and coal trades through East.These developments may sustain SBLK's deleveraging efforts of \"paying down $250 millionin debt a year\" while allowing it to pay out rich dividends ahead.We will also highlight a few metrics to look out for in the upcoming FQ2'24 earnings call inAugust 01, 2024,with it underscoring the health of SBLK's business and near-term prospects.","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"EGLE":"伊格尔散货航运","BK4588":"碎股","BK4021":"海运","SBLK":"Star Bulk Carriers Corp","BK4585":"ETF&股票定投概念"},"translate_title":"Star Bulk第二季度预览：TCE利率居高不下，未来将有丰厚的支出","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EGLE":1,"SBLK":1},"content_text":"SBLK's investment thesis remains compelling with rich forward dividend yields of 12%, as the EU commences their rate cuts and the US likely not far behind.\n        On the other hand, the management has guided higher dry docking expenses, with it potentially being a bottom-line drag while impacting the FQ2'24 variable dividend payouts.\n        Even so, we believe that FQ3'24 is likely bringing forth higher TCE spot rates, thanks to the unusually robust iron ore and coal trades through East.\n        These developments may sustain SBLK's deleveraging efforts of \"paying down $250 million in debt a year\" while allowing it to pay out rich dividends ahead.\n        We will also highlight a few metrics to look out for in the upcoming FQ2'24 earnings call in August 01, 2024, with it underscoring the health of SBLK's business and near-term prospects.\n           fpm/E+ via Getty Images We previously covered Star Bulk Carriers (NASDAQ:SBLK) in April 2024, discussing why it remained a viable dividend investment thesis, with the higher TCE rates likely to boost its adj EBITDA generation and eventually, its quarterly dividend payouts through Q3'24. At the same time, the merger with Eagle Bulk (EGLE) had been completed, with the combined company likely to generate great synergy in operations while being able to command excellent TCE rates as one of the largest dry bulk companies globally with a wide range in fleet profile. Since then, SBLK has offered a total return of +2%, underperforming the wider market at +10.2%. Even so, we are reiterating our Buy rating here, with the recent pullback triggering a richer forward dividend yield and improved margin of safety. We will also highlight a few metrics to look out for in the upcoming FQ2'24 earnings call in August 01, 2024, with it underscoring the health of SBLK's business and near-term prospects, namely TCE rates, dry docking expenses, and balance sheet health. SBLK's Investment Thesis Remains Highly Compelling - Thanks To The Rich Dividend Yields SBLK 6Y Stock Price Trading ViewBased on the price chart above, it is undeniable that SBLK is a stock that is inherently linked to the commodity sector, particularly, the Baltic Dry Index [BDI], an index of average prices paid for the transport of dry bulk materials across more than 20 routes.  With the dry bulker now the largest US listed dry bulk shipping company with 161 of owned vessels, it is unsurprising that the stock will remain volatile moving forward, with its investment thesis tied to variable dividends paid out subject to its dividend policy. In general, SBLK will benefit from higher Time Charter Equivalent [TCE] rates, since it will trigger improved spreads against its fixed Opex while expanding the quarterly variable dividends paid out. For now, SBLK continues to guide robust FQ2'24 Capesize TCE rates at $28.95K (+5.8% QoQ/ +41% YoY), Panamax at $17.25K (+14% QoQ/ +29.1% YoY), and Supramax at $17K (-3.6% QoQ/ +19.1% YoY). This is compared to FY2019 average TCE rates of $13.02K (-5.5% YoY) and FY2021 averages of $26.97K (+128.9% YoY), implying that the dry bulker industry is still enjoying the higher rates compared to the pre-pandemic levels, thanks to the ongoing uncertainty in Red Sea and Ukraine. With SBLK's FQ2'24 TCE rates also exceeding the already elevated spot rates for Capesize fleets at an average of $24.3K/ Panamax at $19.45K/ Supramax at $16.58K in Q2'24, respectively, based on the April 2024/ May/ June averages (aside from Panamax), it is apparent that that the dry bulker has been able to command premium rates with over 97% of its combined fleets scrubber fitted (more environmentally friendly to comply to IMO 2023). On the other hand, SBLK guided higher dry docking expenses of $16.5M in FQ2'24 (+64.6% QoQ/ +52% YoY), partly attributed to the vessels acquired from Eagle Bulk, with these likely to be a near-term bottom-line drag and potentially, impacting the quarter's variable dividend payout. As a result, readers may want to temper their near-term expectations, since we may see the management offer a sequentially lower dividend payouts. Nonetheless, thanks to the unusually robust iron ore and coal trades through East Asia, Capesize TCE rates have jumped drastically to an average of $34K, compared to the relatively stable Panamax at $18.75K and Supramax at $16.25K as of July 03, 2024. With SBLK reporting 16 Capesize and 1 Mini Capesize in its portfolio as of May 2024, we may see the management guide robust FQ3'24 TCE rates (if not through 2025), attributed to the dry bulker industry's low order book and China's firm demand for Brazilian iron ore. As a result, readers only need to remain patient for H2'24, since it may bring forth higher variable dividends. Most importantly, SBLK continues to report a healthy balance sheet with a net-debt-to-EBITDA ratio of 6.75x in FQ1'24 - compared to 11.71x in FQ1'23, based on the lower net debts of $830.14M (-16.4% YoY) and growing adj EBITDA of $122.96M (+45% YoY). This is an impressive feat indeed, despite the recent merger with EGLE and the refinancing of EGLE's debts at lower interest rates, with the higher for longer TCE rates likely to sustain SBLK's deleveraging efforts of \"paying down $250 million in debt a year\" while allowing it to pay out rich dividends.  So, Is SBLK Stock A Buy, Sell, or Hold?  SBLK 1Y Stock Price Trading ViewFor now, SBLK has rallied by +57% since the August 2023 bottom, with the stock's price movement undeniably linked to the volatile BDI spot prices. Despite so, as a dividend stock, it still offers a rich forward dividend yield of 12%, higher than the previous article at 7.82%, the sector median of 1.48%, and the US Treasury's yields of between 4.23% and 5.37%. SBLK's rich payout looks even more compelling here, especially since the European Central Bank [ECB] has already announced a rate cut from 4% to 3.75% by June 2024, joining other countries such as Canada, Sweden and Switzerland, with the US likely not far behind. At the same time, we concur with the Seeking Alpha Quant's C+ rating in Dividend Safety Grade, attributed to the promising market trends and robust TCE spot rates, with Q3'24 likely to bring forth similarly rich prospects. As a result of its robust dividend investment thesis, we are maintaining our Buy rating for the SBLK stock, though with no specific entry point since it depends on individual investors' dollar cost averages and portfolio allocation. It goes without saying, that stock is only suitable for investors with higher risk tolerance and appetite toward cyclical/ variable dividend payouts.   At the same time, with the spot TCE rates highly linked to the the global economic and ongoing geopolitical activities, SBLK's TCE rates may also fluctuate accordingly, triggering reduced visibility into its near term top/ bottom lines.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.0","shortVersion":"4.30.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2449108708"}