Why Shipping?
Approximately 90% of global trade moves by sea. Shipping is the circulatory system of the world economy — and the companies that own and operate these vessels generate enormous cashflows when rates are favorable.
What makes shipping especially interesting for dividend investors is the cyclical nature of the industry. Ship supply is constrained by long build times (2–3 years for new vessels), while demand fluctuates with global trade. When supply is tight and demand is strong, dayrates surge — and so do dividends.
Sub-Sectors
Crude Tankers
VLCCs (Very Large Crude Carriers), Suezmax, and Aframax tankers transport crude oil from producing regions to refineries worldwide. Key metrics include spot rates, time-charter rates, and fleet utilization.
Product Tankers
MR (Medium Range) and LR (Long Range) tankers carry refined petroleum products — gasoline, diesel, jet fuel. Product tanker rates often move independently of crude tanker rates, providing diversification.
LNG Carriers
Specialized vessels that transport liquefied natural gas at -162°C. The LNG market is growing rapidly as countries shift from coal to gas and long-term charter contracts provide revenue visibility.
Bulk Carriers
Capesize, Panamax, and Supramax vessels transport dry bulk commodities — iron ore, coal, grain, and bauxite. The Baltic Dry Index (BDI) tracks these rates and serves as a leading economic indicator.
Key Metrics
- TCE (Time-Charter Equivalent) — Revenue per day after voyage costs. The single most important metric for comparing shipping companies.
- Dayrate — The daily rate a charterer pays to use a vessel.
- OPEX (Operating Expenses) — Daily cost to run a vessel (crew, insurance, maintenance).
- Break-even Rate — The minimum TCE needed to cover all costs including debt service.
- Charter Coverage — Percentage of fleet days already contracted for future periods.
- Fleet Age — Average age of the fleet. Older fleets face higher costs and regulatory risk.
- Orderbook-to-Fleet Ratio — New vessels on order as a percentage of existing fleet. Low ratios signal tight future supply.
What We Look For
When analyzing a shipping stock for our portfolio, we focus on:
- Low break-even rates — Companies that profit even when rates are mediocre
- Modern fleet — Newer vessels are more fuel-efficient and face less regulatory risk
- Dividend policy — Clear, transparent distribution policies tied to actual cashflows
- Balance sheet strength — Low leverage relative to fleet value
- Charter mix — A balance between spot market upside and contract stability
Use our Shipping Cashflow Calculator to model different rate scenarios for shipping companies.
Disclaimer: All content serves exclusively informational and educational purposes and does not constitute investment advice.