Why Diana’s solid cash balance and low leverage are so important

Market Realist

Diana Shipping's unique features and key May 14 discussions (Part 3 of 6)

(Continued from Part 2)

Low leverage

One of the unique aspects of Diana Shipping Inc. (DSX) is its low leverage. Diana Shipping had a debt-to-asset ratio of just 25.36% at the end of 2013 (these figures haven’t really changed much since). In comparison, other dry bulk peers such as Navios Maritime Holdings Inc. (NM), Safe Bulkers Inc. (SB), and DryShips Inc. (DRYS) have leverage ratios of 52.58%, 45.70%, and 55.00%.

Cash position

When measured in net debt-to-capital [(debt - cash)/(debt + equity)], the difference is even larger. Diana’s net debt-to-capital stood at 11.3% at the end of 2013, compared to Navios Holding’s 49.4%, Safe Bulkers’s 36.2%, and DryShips’s 52.9% at the end of 2013. The large difference between Diana’s debt-to-asset and net debt-to-capital ratios reflects Diana’s war-chest cash amount of $240 million at the end of 2013, which increased to $307 million by the end of first-quarter 2014 via offerings of preferred shares. Diana’s cash amount now makes up ~33% of its market cap.

Diana Shipping’s high cash balance and low leverage are reasons why the market values Diana above other companies on a price–to–cash flow or EV-to-EBITDA basis. Still, investors should keep in mind that during industry or market downturns, companies with larger cushions and lower leverage will outperform. However, in upturns, companies that have higher financial leverage will generally outperform.

Certainly, for companies like Diana Shipping Inc. that have the ability—or “ammo”—to acquire vessels, they could still take advantage of market upturns by raising debt and deploying capital to purchase cheap vessels. Whether they will embark on such a strategy, and the extent of their aggressiveness, is up to management.


As reflective of Diana’s lower volatility, Diana Shipping has a beta of 1.19. In comparison, its peers have higher betas: DryShips—2.49, Safe Bulkers—1.61, and Navios Maritime Holdings—2.01. A beta of 1.19 suggests that in the past, when the market had changed 1.0% over a period, Diana Shipping moved 1.19% when accounting for market-related factors.

Continue to Part 4

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