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Global Ship Lease, Inc. Message Board

  • endlessfin1te endlessfin1te Mar 16, 2012 3:34 PM Flag

    Beating a Dead Horse..vs DCIX

    Edge et al...I am planning to sell all my GSL if it ever gets close to $4, and rotating some of the proceeds to DCIX for instant dividend gratification.

    I have trimmed and revised my estimates on GSL's dividend-paying capacity over the past 3 years..and now it stands at $0.32/yr. Most of the interest rate hedges will roll off early 2013, but based on the econ recovery, I think LIBOR will probably be higher by then as well, rendering cashflow changes a wash.

    DCIX, like its parent DSX, seems to have prudent capital structure management. Also, their yield is higher based on FCF payout. Any thoughts?

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    • jdfunnell Mar 16, 2012 4:29 PM Flag

      Yes. DSX was just about the first to eliminate the dividend several years back, with the intent to bring it back when their house was in order. Their house has been in order for some time now and the dividend continues at zip.

      I'd expect DCIX to repeat the pattern, thus rendering your dividend gratification unrequited a quarter or two down the road........Dave

      • 2 Replies to jdfunnell
      • jd, there might be more to like in Diana than you think. For starters they are in a NNA-type ramp up phase, except they seem to look at debt as only a short-term financing vehicle...

        I like DCIX because it takes care of my biggest gripe about shipping firms - They seem to be the only ones in all of shipping to understand that:

        1. Funding finite-useful life assets (ships) with permanent capital (stock) will never work. If you pay out all cashflow you are left with nothing after the ships' lives end.

        2. Depreciation, albeit non-cash, is a real expense. Most REIT and shipping investors add back depreciation to calculate distributable cash, this is true in the short-term. But depreciation really means that the company will eventually have to expend cash to replace/replenish its income sources, either through capex or acquisition. The company HAS TO sock away money for these expenditure when cash is flowing, or equity dilution and/or dividend cut will be inevitable.

        DCIX aims to only distribute 70% of OCF..I'm assuming they will use the rest to retire debt and not to buy more ships. Now they just have to promise not to issue stock until it is overvalued.....I will probably pull the trigger to buy if it drops below $6 and GSL gets closer to $4.

      • I followed others into NNA and consider it a better div play, with longer term potential for serious appreciation as well. Some recent SA articles are negative, but I believe in AF so much more than poor Ian.

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