Star Bulk Carriers: A Safe 9.6% Baby Bond Yielder As Dry Bulk Shipping Rebounds
Published Jul 5, 2020 on Seeking Alpha

Seeking AlphaDividend Ideas | Services  | GreeceStar Bulk Carriers: A Safe 9.6% Baby Bond Yielder As Dry Bulk Shipping ReboundsJul. 5, 2020 9:27 AM ET|| About: Star Bulk Carriers Corp. (SBLK), SBLKZ, Includes: DSX, DSX.PB, SB, SB.PC, SB.PDby: Richard LejeuneRichard Lejeune Panick High Yield ReportDaily alerts on high yield preferred stocks with attractive risk-rewardsSummarySBLK was prepared for an extended dry bulk shipping slump, but the recent huge surge in rates has been a pleasant surprise.
The company has a moderate balance sheet leverage with more than $600 million in equity market cap ahead of the debt.
The SBLKZ baby bonds have excellent protective covenants which further reduce risk.
SBLKZ provides a generous 9.6% yield to its 11/15/2022 maturity.
Shipping is a tough and cyclical sector. Companies such as Star Bulk Carriers Corp. (Nasdaq: SBLK) can hope for the best, but they must be prepared for the worst. SBLK is always well prepared for an extended down-cycle. This is done by maintaining a strong balance sheet with excellent liquidity, low-cost operations and staggered debt maturities.
While shipping can have vicious and extreme downturns that eliminate weaker players, there are also joyful periods of profitability when rates soar. Sometimes this transition happens quite fast and unexpectedly. Things looked very bleak as the Baltic Dry Index bottomed out at 393 in May. Demand to ship major dry bulk cargoes such as coal and iron ore was curtailed by the COVID-19 virus. Surprisingly, the BDI has now rebounded to 1,749 less than two months later. This is solidly profitable territory for dry bulk shippers such as SBLK.
Even with the recent rally, Star Bulk Carriers Corp. 8.30% SR NT 22 (Nasdaq: SBLKZ) continues to offer income investors a safe 9.6% yield to maturity. This is true despite the dry bulk rebound, financial strength of SBLK and near-term maturity of this baby bond. This article looks at the top 10 reasons why income investors should... Read more