Shipping broker Braemar Shipping offers a dividend yield of 6% given the annual dividend of 26p and the current share price of 430p. The “catch” is that the dividend isn’t well covered and that shipping is cyclical. However, the group has withstood difficult market conditions with first half earnings per share up by 58%.
The story of a company, from the perspective of investors, can be told through the annual dividend payments. Looking back over the last few decades and the dividend resilience and growth rate are both revealing.
The personal care group PZ Cussons, for example, boasts of 42 consecutive years of year-on-year increases in its annual dividend. The company has therefore clearly been able to withstand the economic downturns.
Turning to the small cap (£130m) shipbroker Braemar Shipping and the company cut its dividend in 2002. However, the annual payout has at least been maintained since then and was last increased to 26p in 2011.
Braemar Shipping EPS & dividends (year to February)
Source: Braemar Shipping presentation
Shipbrokers are currently grappling with historically low dry bulk shipping rates and the related slowdown in China. If Braemar can withstand these headwinds then the current valuation, with a 6% dividend yield, is attractive.
Braemar’s earnings per share came in at 48.4p in the year to February 2011 but had fallen to 31.3p in the year to February 2015. The current financial year to February 2016 should, though, see a return to earnings growth.
As a small cap company Braemar is high risk and it’s not easy to buy into or sell out of the shares. However, the July 2014 merger with ACM Shipping has boosted Braemar’s market position and the first half financial results were strong.
Braemar Shipping 101
Braemar Shipping has a history stretching back to 1842 when the Cory brothers formed a shipping merchant. The company was listed on the London main list in 1997, started trading at 255p and today the share price is around 430p.
Since listing in 1997 the group has become more diversified by undertaking a series of mergers and acquisitions. Braemar’s three divisions today are Shipbroking, Technical and Logistics.
The acquisition of ACM Shipping at the end of July 2014 has boosted the importance of Shipbroking to the group. In the first half of the current financial year Shipbroking was over half of…
