Diana Series B - A Solid 10% Yield Investment Proposition

Seeking AlphaDividend Ideas | GreeceDiana Series B - A Solid 10% Yield Investment PropositionAug. 6, 2020 10:02 PM ET|| About: Diana Shipping Inc. PERP PFD SER B (DSX.PB), Includes: DSX, SB, SB.PC, SB.PD, SBLK, SBLKZby: Shipping Equity AnalysisShipping Equity Analysis Shipping, long/short equity, Deep ValueSummaryProjected free cash flows provide strong coverage of the Series B dividend yield.
The Series B dividend is defensively positioned against a weakness in dry bulk shipping demand.
Management reiterates its plans for a defensive strategy to guard the dividend distribution.
Key Takeaway
Diana’s (DSX) Series B (DSX.PB) preferred equity is a solid 10% yield investment proposal for a high yield fixed-income investor on the back of the following reasons:
1. Forecasted free cash flow yields 17% and 39% on my 2020 and 2021 estimates, providing strong coverage of the 10% preferred dividend yield.
2. Stress testing Diana's liquidity indicates that Series B dividend distribution is defensively positioned. The company's prudent capital allocation strategy and healthy cash balance as of June 30, 2020, are the main reasons.
3. Management reiterated its disciplined approach regarding future capital allocation, asset sales and acquisitions. Management's commitment provides extra support to the Series B dividend distribution.
On July 28, 2020, I published a research note on DSX’s common shares. I recommended a Hold investment rating and target price of $1.77/share (See DSX Dashboard for additional details). The note discusses the following key points:
1. The dry bulk demand overview and outlook.
2. DSX’s position in the dry bulk market.
3. DSX's chartering strategy, debt profile and net asset valuation.
It is highly recommended to read Diana Shipping Inc. – Hold Until Further Notice to get an overall sense of the key factors that influence the company's common and preferred equity valuations.
Diana Shipping Inc. – Series B
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