I recently had someone ask me my thoughts on DSX. This is a stock I started purchasing in early January 2007 at around $16 a share. I sold some of my shares in October 2007 at $43 a share. I still own 130 shares of the stock and plan to keep the shares even after the dividend has been cut. I view DSX as a long term value play of commodity prices and the future growth of China and India.

Chief Executive Simeon Palios said the company was not pressured by banks to suspend its dividend. Instead it is looking to preserve cash to purchase assets at rock-bottom prices. “By suspending dividend we free up cash to make investments such as vessel acquisition, which would deliver significant returns over the next several years,” Palios said.

Cantor Fitzgerald analyst Natasha Boyden said she is encouraged by Diana’s dividend suspension because it allows the company to retain free cash flow in order to take advantage of opportunities. “Due to the company's low leverage, we believe the dividend suspension is not a reflection of any liquidity issues, but rather an indication of the company's financial strength and desire to grow the fleet,” she said.

Here is my review of the stock from 7/15/2007.

Company Profile
DSX is a Greek shipping company specializing in transporting dry bulk cargoes such as iron ore, coal, grains and other materials. DSX has 13 Panamax ships and 3 Capesize in current service. They have 3 Capesize on order with the first to be ready in November 2007 and the other two in 2Q of 2010. DSX completed an initial public offering of common stock on March 23, 2005.

Management Objectives
Managements objective is to manage and expand its fleet in a manner that will enable DSX to pay attractive dividends and enhance shareholder value. To accomplish this objective, DSX intends to pursue highly focused business strategies, including: continuing to operate a high quality fleet; strategically expanding the size of our fleet; pursuing an appropriate balance of short-term and long-term time charters; maintaining a strong balance sheet with low leverage; and maintaining low cost, highly efficient operations.

Fundamentals and Prospects
Sales for DSX have grown at 66% the past 3 years and Earnings Per Share (EPS) have grown by 30% for the past 3 years but slowed over the last two. The current dividend rate for DSX is 7.69%. One thing to note, DSX has a negative Free Cash Flow but looks like it will turning positive in the next couple of quarters.

The real measure to examine at is the Baltic Dry Index (BDI) which is an average of rates for shipping various dry goods on specified routes. The BDI average for Panamax ships went from 34,610 on January 2, 2007 to 59,050 on July 13, 2007. The big reason for the increase in the rates can be explained by China as it is importing huge amounts of grains and raw materials. This is a good sign for the economy as the BDI is a leading indicator but it also could signal higher interest rates and commodity prices. The Panamax BDI rate is on the DSX website under their Fleet Employment

Conclusion
This is a risky dividend stock but if the demand for raw material from China and the world keep increasing, the rate for hiring a dry bulk ship will keep increasing as well. I see the demand for raw materials increasing for the rest of the year so I rate DSX a buy but be very careful of the BDI.

Disclosure: The Div Guy owns shares of DSX at the time of this post.