One of the many ways that the global economy and investing changed during the pandemic was a greater appreciation for the supply chain. People who never considered how a retailer got their goods from the other side of the world had a greater awareness of shipping companies and shipping stocks to buy.
While Covid-19 will probably always be with us, in one form or the other, at least the pandemic has ended. But even today, supply chain issues can disrupt commerce. Shipping companies that can move goods consistently and on time are that much more valuable in the post-pandemic world.
Shipping stocks can provide some fantastic returns to investors. But you also have to be prepared for some volatility. They can be affected by downturns in the global economy, fuel costs and shipping rates.
On the plus side, shipping stocks can often be a good source of dividend income. And I always appreciate a stock that pays me to hold it.
Here are several shipping stocks to buy that are good deals now, based on their grades in the Portfolio Grader.
Scorpio Tankers (STNG)
Scorpio Tankers (NYSE:STNG) operates a fleet of 112 tankers from its headquarters in Monaco.
What sets this company apart is the fleet age, which is fewer than eight years. Scorpio has a modern and well-maintained fleet, which makes it more efficient.
Scorpio transports refined petroleum products and crude oil, so its profits are tied to the oil industry. Oil prices are on the rise and global oil demand should hit 102.1 million barrels this year, a record high. So that bodes well for Scorpio’s bottom line.
Revenue in Q2 was $329.3 million, with an income of $132.4 million or $2.40 per share.
Scorpio Tanker is down 10% so far this year, but its future looks promising. It also provides a dividend yield of just over 2%. It gets a “B” rating in the Portfolio Grader.
TORM (TRMD)
Headquartered in Denmark, TORM (NASDAQ:TRMD) operates tankers that transport refined oil products, including gasoline, naphtha, diesel and jet fuel. It has a fleet of 87 vessels, with the biggest capable of carrying 115,000 deadweight tons (DWT).
The company is coming off a good second quarter, in which it saw higher shipping rates push its time charter equivalent (TCE) to $36,360, up 23% from a year ago. Earnings of $308 million were up 46% from a year ago.
The company issued guidance for TCE earnings of $1.05 million to $1.175 million, which is down slightly from its previous guidance of a range from $1.025 million to $1.375 million. The company said its guidance is based on current product tanker market expectations, but future TCE rates with customers have not been set and could fluctuate. That’s to be expected when you are investing in an industry as volatile as shipping, though.
But the best thing about TORM is the dividend – a yield of 24.1% can’t be beaten. For that kind of return, I’ll live with volatility.
Euronav (EURN)
Staying in Europe, Euronav (NYSE:EURN) is the biggest independent crude oil tanker company on the planet. The company, based in Belgium, has a fleet of 70 tankers, with the largest capable of transporting more than 400,000 DWT.
Like the previous companies on this list, Euronav will be impacted by rising oil prices that bodes well for the company. The company says that it is seeing volatility in freight rates, but it’s expected to be at “highly profitable levels.”
Revenue in the second quarter was $348.1 million, up from $148.6 million in the same quarter a year ago. Profits of $161 million were massive compared to the loss of $4 million in Q2 2022.
Euronav also cautioned that production drops by OPEC and Saudi Arabia’s decision to reduce output by 1 million barrels per day for the rest of the year would be a headwind for it and other oil companies. But non-OPEC production continues to be strong, the company says.
EURN stock is down 8% this year but a dividend yield of 16% reduces the sting. It gets a “B” rating in the Portfolio Grader.
Frontline (FRO)
Frontline (NYSE:FRO) is a Bermuda-based shipper of crude oil and oil products. The company maintains a fleet of 65 vessels and is coming off its most profitable quarter since 2008.
“Despite OPEC production cuts, global oil in transit outperformed seasonal patterns, as Asian oil demand attracted incremental barrels from other regions of the world,” CEO Lars Barstad said. “Despite uncertainties in the global macro environment, demand for oil and oil products seem largely unaffected as we head towards the winter in the northern hemisphere.”
Revenue in the second quarter was $512.8 million, with profits of $210 million or 94 cents per share.
Frontline also offers a dividend yield of 15% and has seen its stock price jump 36% this year.
FRO gets an “A” rating in the Portfolio Grader.
SFL Corporation (SFL)
SFL Corporation (NYSE:SFL) is another Bermuda-based shipping company, but it’s more diversified than others on this list. SFL uses its 73 vessels to ship cars, energy products, containers and dry bulk items.
And its growing out its fleet, investing in four dual-fuel car carriers that would help the company lower its greenhouse gas footprint. The vessels are to be delivered in the second half of 2023 and early 2024.
But what really sets SFL apart in my mind is its commitment to its dividend. SFL has paid a dividend every quarter for nearly 20 years. Its current yield of 9% is generous.
Revenue in the second quarter was $160.37 million, up 5.7% from a year ago. Income of $16.93 million provided earnings per share of 13 cents.
SFL stock is up 21% this year and gets a “B” rating in the Portfolio Grader.
Teekay Corporation (TK)
Teekay Corporation (NYSE:TK) is a crude oil transporter that’s celebrating its 50th year in 2023.
It has a fleet of 65 ships and operates five vessels for the Australian government, including a border force cutter and an emergency towing vessel.
It also provides crewing services for large-scale companies and the Australian government. The company’s fuel services division provides bunkering for over 180 vessels around the world.
Earnings for the second quarter were solid, as the company said it benefited from firm spot tanker rates that were driven by high export volumes from the U.S. Gulf region and Russia, combined with high demand from India and China.
“Looking ahead, we anticipate crude tanker utilization will remain elevated, which we expect will pave the way to a strong winter market,” the company said in its Q2 earnings report. Revenue of $345.4 million was up 40% from a year ago.
Teekay also repurchased $25 million in shares in the second quarter and overall bought back $55 million in shares since August 2022.
TK stock is up 32% this year and gets an “A” rating in the Portfolio Grader.
Euroseas (ESEA)
Euroseas (NASDAQ:ESEA) is a container shipping company based in Greece.
It has a fleet of 19 vessels, including 12 feeder and seven intermediate cargo ships with a total capacity of 58,861 twenty-foot equivalent (teu) But it’s expanding and plans to grow to 26 ships with a capacity of 74,461 teu.
Earnings for the second quarter were $47.7 million in revenue and net income of $28.9 million, or $4.17 per share.
Euroseas extended its $20 million share repurchase program for another year and announced a dividend of 50 cents per share for the quarter. The company provides a total dividend payment of $2 per share annually, with a yield of 7.2%.
ESEA stock is up 49% this year and gets a “B” rating in the Portfolio Grader.
On the date of publication, Louis Navellier had long positions in STNG, FRO and TK. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
