2020 Bulkers – the shipping companies’ Best in Test
2020 Bulkers has gone from a company that almost no one has heard of to becoming one of the most popular dividend companies among Swedes.
2020 Bulkers shipping company
This is a small Norwegian shipping company at sea within what are called dry bulk companies , i.e. companies that ship dry products on their ships. Then we also have ships that transport liquids such as oil and the like, but Bulkers do not belong here.
2020 Bulkers can generate a nice free cash flow thanks to its low breakevens* which the company then uses to pay out monthly to its shareholders in the form of dividends.
*The lower the breakeven, the faster the company can get positive effects from its investments (ROI)
The shipping company’s goal is relatively simple. Through its 6 Newcastlemax vessels, it wants to maximize total shareholder return. The company leases the vessels to strong counterparties and distributes the vast majority of the profits to its shareholders.
Since the share was listed on the Oslo Stock Exchange, this goal has been met with flying colors. The total return since then has been just over 300% and as an example, OMXS30GI has made 64% during the same time frame. The absolute majority comes from the extremely high dividend, which has averaged about 10% since listing. This can be compared to the average of OMXS30, which is 3.39% direct yield.
Ship sold to improve balance sheet
Last year 2020 Bulkers sold two of its then 8 vessels. In other words, a fairly large proportion of the fleet. This may sound negative at first glance, but they got a good price and with the lump sum the company has managed to pay off a large part of its debt but also a fat extra dividend to its shareholders. Therefore, it becomes a bit tricky to see the dividend yield based on TTM, i.e. the last 12 months if we also include the extra dividend. Then the dividend yield will be 15% and you will not get that over time.
As you can see in the chart below, the dividend is very volatile and you will notice that some months the dividend is halved while others it is doubled. In the table below you can also see the really big extra dividend that happened:
There will be times when 2020 Bulkers can be traded really cheaply given freight rates and concerns. We are not really there today. It is worth noting that all shipping companies by sea are exposed to a very high political risk. We see this today, for example, with the tension between the US and China.
I have to say that I like the management’s decision to sell the two ships. In time, they will probably be able to find the right opportunities to buy them back cheaper than today and in the meantime, they will reduce the debt significantly, which of course will help keep the free cash flow at a good level.
To sum up, 2020 Bulkers is doing really well, the balance sheet is clearly solid. I really haven’t looked at all the companies in shipping , but 2020 Bulkers is without a doubt my favorite. If you want to own a shipping company with a high dividend, there is probably nothing better to own than 2020 Bulkers. The fact that you pay the dividend monthly is a big plus. As a final note, I am starting with a small poistion here, will add slowly in coming months.
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