Snapshot:  Formed in 2005, Eagle Bulk Shipping (Nasdaq: EGLE) is one of the largest dry bulk carriers in the U.S. Its fleet of 22 vessels carries iron ore, coal, grain, cement, and fertilizer to China and around the world. Eagle leases its vessels to operators under one- to three-year contracts. These short to medium-term contracts provide stable cash flow and dividends, but also allow the company to benefit from rising freight rates as the contracts rollover. The firm's modern fleet has an average age of just six to seven years, allowing Eagle to keep maintenance costs down and get top dollar for its shipping services.

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Dividend:  Management's stated policy is to pay out almost all its cash flow in the form of dividends to shareholders. Based on the last two quarterly dividends of $0.51 per share, the stock pays an annual distribution of $2.04 per share and offers a hefty dividend yield of 10.4% at today's share price. 

As a new company that's been aggressively building its fleet, Eagle has poured huge amounts of cash into buying new vessels. As a result, its dividend payout ratio is currently over 100%. We expect that to move lower as its new ships are delivered and start contributing to earnings.

The company does have a dividend reinvestment plan available for shareholders. For details, you can contact 1-800-962-4284 ext 3780. 

Growth:  Eagle has spent nearly $500 million building its dry bulk fleet over the past year and a half. It recently purchased three ships, scheduled for delivery over the next few months, which will be operated under one and two-year contracts at today's strong market rates. Management estimates that these three charters alone are worth about $50 million in total revenue. Another two vessels are currently being built for delivery over the next two years. A recent common stock offering helped fund the acquisitions, leaving the company with a sound balance sheet and ample liquidity for future acquisitions. 

Outlook:  The outlook for dry bulk carriers like Eagle is bullish right now. Earnings are forecast to grow an estimated +13% next year, based on new vessels coming down the pipe and continued strength in the dry bulk market. With 97% of its projected earnings already locked up under fixed-rate contracts in 2007 and 53% in 2008, Eagle is relatively insulated from volatile freight rates. 

The shares have surged approximately +50% over the past year, about five times more than the S&P 500. A recent issue of 5.4 million shares priced at $18.95 per share raised millions to help fund recent purchases, but it may have placed a near-term ceiling on the share price. Still, trading at less than 14 times next year's projected earnings, the stock is fairly priced, especially considering its double-digit dividend yield.

Action To Take --->  Given its aggressive growth strategy and shorter-term contracts, we consider EGLE a moderate to higher-risk security. Over the long-term, the stock should provide investors with an increasing income stream, but not without some near-term volatility.

Good investing!

Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com

Carla has been employed in the investment industry for more than two decades. In addition to her work as a writer for several other nationally recognized financial publishers, her previous experience includes a position as President of a well-respected investor relations firm. She has also been writing shareholder reports for public companies (annual reports, speeches, corporate profiles, slide shows, etc.) since 1980.

A highly successful investment analyst, Carla specializes in high-yield, income-paying stocks. In that pursuit, she's always mindful to select companies that not only pay rich dividends, but that also have the potential to deliver strong long-term capital gains.

On the educational front, Carla holds both MBA and Ph.D. degrees. When she's not watching the market, she's teaching business courses at the college level and managing several million dollars in portfolio assets.

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