Stronger dividend payouts by dry bulk peers have caused New York-listed Genco Shipping & Trading’s valuation to trail some others in the sector, but a solution is coming. That was the take from Genco chief executive John Wobensmith in a recent interview with Value Investor’s Edge commentator J Mintzmyer as the Manhattan-based bulker owner prepares to unveil its fourth-quarter earnings. The big news for Genco will be the size of its own dividend under a new high-payout policy previewed by the owner last April.

While Genco has taken its time rolling out the new product – slashing debt along the way – others have already been paying fatter dividends, including the likes of Greece’s Star Bulk Carriers and Connecticut’s Eagle Bulk Shipping. Mintzmyer asked Wobensmith why Genco “trades among the cheapest in the entire market in the dry bulk sector”. The researcher added: “There are companies that have less attractive or less transparent dividend policies, and they trade higher than Genco. What do you think is going on there, John?” Wobensmith said that on a price-to-net asset value basis, Genco had been near the top of the dry bulk pack through last summer. “After July that broke down…when most of our peers initiated their large dividend policies in the third quarter, and even in the second quarter in some cases. And I think that’s been a big driver,” Wobensmith said.

Genco did gradually increase its dividend from $0.02 per share to $0.15 over the course of 2021, but bigger numbers await. Mintzmyer did not publicly disclose his internal valuation metrics for the dry bulk group. However, investment bank Jefferies recently pegged Genco at 70% of its net asset value. This was well behind Star Bulk Carriers’ 82%. It also trailed Grindrod Shipping at 73%, but the number was slightly better than Eagle Bulk Shipping’s 69%. In any case, Wobensmith went out to make the case that Genco aspires not just to close any gap with peers, but to itself establish a sector-leading trading premium. “We’ve looked at 15 years of data, public shipping companies across all sectors. And there’s no doubt that dividend-paying companies trade at a higher valuation than non-dividend-paying companies,” Wobensmith said.

Genco has not yet tipped what its enhanced payout for the fourth quarter will be. Jefferies analyst Randy Giveans recently told TradeWinds not to expect too much, noting that Genco used the quarter to bring down its debt to a year-end target of $245m. Depending on hire rates, the bigger payouts should follow this one, he projected.

Mintzmyer speculated in his dialogue with Wobensmith that Genco could pay close to $4 per share for the full year. “Which is massive,” he said. “If that happens, wow, I’m not going to be complaining as a shareholder.”

Wobensmith harkened back to the last time Genco paid large dividends in the peak market between 2006 and 2008, saying the payouts reflected a double-digit yield for the first four quarters before the stock price responded strongly and the yield dropped to single digits. “It took four quarters to season before you really got that yield where we believe it should be trading,” Wobensmith said.

The difference: this time Genco has minimal debt, in the range of 20% leverage.