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A Safe 10.6% Yield From A Shipping Issue: GSL Preferred Stock

The cyclical shipping sector has a well deserved reputation for high risk. However, Global Ship Lease (NYSE: [[GSL]]) has a long-term leasing model, which minimizes their exposure to short-term fluctuations in shipping rates. All but 2 of their 18 ships are on long-term fixed rate leases with an average duration of 6.5 years. None of these long-term leases expires before late 2017. The cash flow to cover the next 3 years of preferred stock dividends is virtually guaranteed.

Most GSL ships are leased to CMA CGM. Their primary customer also owns a 45% equity stake in GSL and manages their ships. CMA CGM is the world's third-largest shipping company and had stable earnings of $412 million for the first nine months of 2014. Lease counterparty risk is not a concern.

GSL-PB is the 8.75% par 25 cumulative preferred stock issue for GSL. At a recent price of $20.88, the preferred… Read More …