In this low interest rate environment, some shipping stocks are generating income for investors.
Take Teekay Corp., which transports approximately 10 percent of the world’s seaborne oil. The company has built a significant presence through three publicly traded subsidies (known as daughter companies) that offer some serious yield for investors:
- Teekay LNG Partners L.P.
- Teekay Offshore Partners L.P.
- Teekay Tankers Ltd.
"We have a lot of assets sitting up at the parent. In addition we own shares in the daughter companies. That value is about $48 bucks a share and we are trading at $28, $29. That’s why we announced a stock buy-back program—recommencing up to $200 million dollars," Bjorn Moller, president and CEO of Teekay Corp., told CNBC's "The Strategy Session on Tuesday.
Peter Evensen, CEO-elect of Teekay, who appeared with Moller on CNBC, also talked about how important buy-backs have been to the company.
“Between 2004 and 2006 we bought back 24 percent of our stock when we had a lot of excess cash flow. We are now moving into another period of excess cash flow. So when our trading window opens in November then we are going to start to buy back aggressively,” Evensen said.
"As capital starts to generate we have a compelling investment opportunity trading under 40 percent discount to what we’re worth," he said.
Evensen believes that even though tanker rates in the third quarter have really been pretty poor, Teekay has paid a competitive dividend because 50 percent of its ships—a fleet of over 146 vessels in 16 countries—are fixed to Teekay Tankers, thereby allowing for stable cash flow.