For Genco Shipping & Trading chief executive John Wobensmith, it is not so much about implementing a dividend as it is sustaining a dividend.
That, he said, will hold the key to the owner’s new strategy to reward shareholders with payouts regardless of what an historically volatile dry bulk market may throw its way.
"One of the real criticisms investors make of the shipping industry is that you pay dividends in good times, but you’re too levered to pay in bad times – that’s one reason these equities haven’t traded better," Wobensmith told TradeWinds.
"From the types of investor meetings we’ve had so far and the number of meetings, the reaction has been encouraging. And I think once we announce that first [high-payout] dividend and it becomes seasoned — it will take us time to build that credibility of a consistent dividend — the stock should start trading off of free cash flow rather than just NAV."
While some companies have lowered their leverage simply because vessel valuations have climbed, Genco has steadily been paying down debt in a strong rates market, which Wobensmith finds a key distinction.
Part of its dividend formula will be establishing a reserve fund for items including fleet renewal.
Wobensmith said Genco likes the age profile of its current fleet of capesize and ultramax/supramax bulkers, but understands that renewal and replacement of vessels will be critical going forward.
"I think we’re in a sweet spot with an average age of about 10 years," Wobensmith said. "That age is a sweet spot when it comes to return on capital. But in order to keep it there, you need to constantly be looking at selling older tonnage and buying newer tonnage."
He said one thing Genco will not be looking at is the newbuilding market, and this has little to do with uncertainty over future propulsions systems.
"We don’t need that as a deterrent because we’re simply not ordering newbuildings right now," he said. "I can’t get my head around any capital allocation strategy involving ordering newbuildings.
"I don’t understand why anyone would be out ordering ships when, for a lower price, you can get secondhand tonnage, start earning in a strong market and de-risk the asset right away."
