My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

Safe Bulkers will report 3Q2011 financials on October 17th, 2011

One of my favorite high dividend stocks, Safe Bulkers (SB), will report its 3Q financials after the market closes on Monday October 17th, 2011.  Unnamed, faceless Wall Street analysts expect between $1.43 - $1.53 in earnings for 2011.  SB earned $0.41 in 1Q2011 and $0.27 in 2Q2011 for a total of $0.68 for the first six months of 2011.  Safe Bulkers needs to earn $0.38 in each of the next quarters to meet estimates.

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They might meet these estimates because the Baltic Dry Index has increased slightly in 3Q2011 compared to 2Q2011.  The stock price will get hammered if the S&P turns down, the Baltic Dry Index turns down, or it the EPS numbers are below estimates.  We haven’t seen the bottom in Safe Bulkers yet.

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press release

Oct. 11, 2011, 9:26 a.m. EDT

Safe Bulkers, Inc. Sets Date for Third Quarter 2011 Results, Dividend Announcement, Conference Call and Webcast

Earnings Release: Monday, October 17, 2011, After Market Closes; Conference Call and Webcast: Tuesday, October 18, 2011 at 09:00 A.M. EDT

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ATHENS, GREECE, Oct 11, 2011 (MARKETWIRE via COMTEX) -- Safe Bulkers, Inc. (the Company) /quotes/zigman/512899/quotes/nls/sb SB +2.21% , an international provider of marine drybulk transportation services, announced today that it will release its results for the quarter ended September 30, 2011 after the market closes in New York on Monday, October 17, 2011. The Company also expects to announce the declaration of a dividend for the third quarter 2011 at that time.

On Tuesday, October 18, 2011 at 9:00 A.M. EDT, the Company's management team will host a conference call to discuss the financial results.

Conference Call details: Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 819-7111 (US Toll Free Dial In), 0(800) 953-0329 (UK Toll Free Dial In) or +44 (0)1452-542-301 (Standard International Dial In). Please quote "Safe Bulkers" to the operator.

A telephonic replay of the conference call will be available until October 25, 2011 by dialing 1 (866) 247-4222 (US Toll Free Dial In), 0(800) 953-1533 (UK Toll Free Dial In) or +44 (0)1452 550-000 (Standard International Dial In). Access Code: 1859591#

Slides and audio webcast: There will also be a live, and then archived, webcast of the conference call, available through the Company's website ( www.safebulkers.com ). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About Safe Bulkers, Inc. The Company is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for some of the world's largest users of marine drybulk transportation services. The Company's common stock is listed on the NYSE, where it trades under the symbol "SB." The Company's current fleet consists of 17 drybulk vessels, all built post-2003, and the Company has contracted to acquire 10 additional drybulk newbuild vessels to be delivered at various times through 2014.

Link to original press release: http://www.marketwatch.com/story/safe-bulkers-inc-sets-date-for-third-quarter-2011-results-dividend-announcement-conference-call-and-webcast-2011-10-11?reflink=MW_news_stmp

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Safe Bulkers, Inc. Announces a Two-Year Time Charter With a Forward Delivery Date for a Kamsarmax Newbuild Vessel at $13,250 Gross Daily Rate

Safe Bulkers, Inc. Announces a Two-Year Time Charter With a Forward Delivery Date for a Kamsarmax Newbuild Vessel at $13,250 Gross Daily Rate

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ATHENS, GREECE, Oct 07, 2011 (MARKETWIRE via COMTEX) -- Safe Bulkers, Inc. (the "Company") /quotes/zigman/512899/quotes/nls/sb SB -2.74% , announced today that it has entered into a new period time charter for a 82,000 dwt, Chinese built, Kamsarmax class vessel, for a duration of 24 to 27 months, with a forward delivery date within the second or the third quarter of 2012, at a gross daily charter rate of $13,250, less 4.75% total commissions. The charter is expected to commence upon delivery from the shipyard.

As of today, the contracted employment of fleet ownership days for the full year 2011, 2012 and 2013 is 94%, 64% and 57% respectively. Contracted employment includes vessels which are scheduled to be delivered to us in the future.

Dr. Loukas Barmparis, President of the Company, said: "The new two-year time charter secures employment for one of our Chinese newbuild Kamsarmax class vessels and expands our charter coverage for the coming two years."

Link to original press release: http://www.marketwatch.com/story/safe-bulkers-inc-announces-a-two-year-time-charter-with-a-forward-delivery-date-for-a-kamsarmax-newbuild-vessel-at-13250-gross-daily-rate-2011-10-07?reflink=MW_news_stmp

That is really cheap.  Most of their ships are rented out for between $20,000 and $24,000 per day.  It was a wise move to lock in this ship for two years because of the coming worldwide recession that will hit the dry bulk shipping rates harder than the present.

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Don't buy Safe Bulkers yet even though it is below $7.00

Safe Bulkers has been absolutely hammered since April of 2011, but don't buy it yet.  I know it is in value territory right now.  But trust me...it will go lower with the world economy because dry bulk shipping rates are affected by the world economy.  Wait until the technicals show a bottom for this excellent dividend company.
 
You can read all my articles on Safe Bulkers fundamentals by clicking on this link: http://www.myhighdividendstocks.com/category/high-dividend-stocks/sb
 
 
Here is the link to the SB chart if it doesn't appear above: http://stockcharts.com/h-sc/ui?s=SB&p=W&b=5&g=0&id=p02710131286
 
The technicals I'm looking for are the CCI coming out of the red zone, the price lifting off the lower Bollinger Band, and the MACD turning upward.
 
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A first look at the high dividend stock CenturyLink (CTL)

A friend asked me about CenturyLink (CTL) today.  I’ve seen their name on a few high dividend stock screens, but I never looked at them very closely yet.  I knew that their core business used to be rural telecom, but it appears that is changing.  The big question remains “Is that 8+% dividend for real?”  Find out below as I take my first look at CenturyLink.

CenturyLink (CTL)

Market price: $33.90

Market capitalization: $20.87 billion in equities and another $21.3 billion in bonds

Shares outstanding: 616.44 million

With the acquisition of Embarq in 2009 and Qwest in 2010, CenturyLink is now the third-largest phone company in the United States, providing local phone service to 15 million lines and high-speed Internet access to 5.4 million customers across 37 states. The firm also owns a nationwide fiber optic network that spans 190,000 route miles and 16 data centers. The firm plans to acquire Savvis, an information technology services firm that brings 32 additional data centers spread globally.

Here is Morningstar’s take from their website, “With the acquisition of Savvis SVVS, CenturyLink is pushing forward with its effort to shift the business toward enterprise services and away from legacy sources of revenue like access fees and subsidies. We expect the firm will still struggle to grow in aggregate, though, as it fights the decline in the core phone business. Despite the lack of growth, the firm should generate enough cash flow to support the dividend for the foreseeable future.”

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Dividend record: CTL paid a puny dividend until mid-2008 then it jumped 10 fold.  It paid no dividends in two quarters of 2009.  It has paid $0.725 per share quarterly for the last seven quarters (2010 to the present). 

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Dividend: $0.73 quarterly

Dividend yield: 8.5% ($2.90 annual dividend at current rate/$33.90 share price)

Dividend payout ratio: 181% - 193% using the lower EPS guidance below.  The dividend will have to be cut or they will have to finance the dividend some other way (additional stock offering, saved cash, or more debt)

I noticed that there was a Reuters key development concerning earnings guidance for the rest of this year.  http://www.reuters.com/finance/stocks/CTL/key-developments/article/2376623

“CenturyLink, Inc. Raises FY 2011 Revenue Guidance; Lowers FY 2011 EPS Guidance
Wednesday, 3 Aug 2011 08:55am EDT 

CenturyLink, Inc. announced that for fiscal 2011, it expects pro forma operating revenues to be between $18.5 to $18.8 billion and pro forma diluted EPS is expected to be between $1.50 to $1.60. According to I/B/E/S Estimates, analysts on an average are expecting the Company to report revenues of $17.90 billion and EPS of $2.64 billion for fiscal 2011”

Earning power: $0.89 per share @ 616.44 million shares

(earnings adjusted for changes in capitalization.  CentruryLink has double the number of shares since 2010 which was three times higher than in the years 2006-2008)

            EPS       Net inc.             Adj EPS             Shares

2006     $3.07    $370 M              $0.60                122 M

2007     $3.72    $418 M              $0.68                113 M

2008     $3.56    $366 M              $0.59                103 M

2009     $3.23    $647 M              $1.05                199 M

2010     $3.13    $948 M              $1.54                301 M

TTM      $2.04    $770 M              $1.25                377 M

Five year average adjusted EPS = $0.89

Consider for a value buy below $7.14 (8 times average earnings)

Consider for an investment buy below $10.68 (12 times average earnings)

Consider selling above the speculative price of $17.80 (20 times average earnings)

CenturyLink is currently trading at $33.90.  It is speculatively priced because it is trading at 38 times it 5 year average earnings.

Balance sheet: Major growth in equity with each acquisition e.g. Qwest in 2011, but large debts to equity and not a lot of money available for short term debts maturing in the next year.

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Book value per share: $35.11

Price to book value ratio: 0.97 (good)

Current ratio: 0.99 as of 2Q2011 (over 2.0 is good)

Quick ratio: 0.50 as of 2Q2011 (over 1.0 is good)

Debt/equity: 1.53 as of 2Q2011

Conclusion: CenturyLink’s dividend is in jeopardy, it is speculatively priced, and its balance sheet is mediocre.  Wait for the dividend cut, watch as its price drops down to lower earnings multiples and the global bear market exerts downward pressure on the stock price, and see what the merged company does to strengthen its balance sheet.  I’m ignoring this stock until it drops below $17.80 per share.

Disclosure: I don’t own CenturyLink.

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Teekay Tankers still not a buy at $5.97 (-44% since April 2011).

I wrote about Teekay Tankers (TNK) back on April 6th, 2011.  I said it was a speculatively priced high dividend stock.  My conclusion was this:

“I would wait to see what their earnings look like in 1Q and 2Q in 2011.  I haven’t really analyzed its dividend record, earnings and balance sheet.  I’ll take a look at it if the price drops below 20 times its 2 yr. average earning of $8.80.”

Read the rest here: http://www.myhighdividendstocks.com/high-dividend-stocks/are-these-two-oil-tanker-companies-high-dividend-stocks

Teekay Tankers is trading at $5.97 as I write this.  That is a drop of 44% since April 2011.  So I will make good on my promise to examine Teekay Tankers when it goes below $8.80.  The company has issued a lot of stock since April 2011, so my $8.80 price has to be adjusted downward as you will see below.

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The yield back then was reported as 11.59%, but I knew that Google Finance didn’t calculate the dividend yield correctly because of the recent dividend cut.  I estimated the dividend yield at 8.2% which still a high dividend stock.  It was trading at over 24 time its two year average earnings.  I usually use at least five years average earnings, but the tanker market has fundamentally changed for the worse in the past three years.

There is an enormous supply glut of oil tankers which have a depressing effect on tanker rental prices.  We will not see the high rental prices of 2008 in the distant future, so I’m throwing out the effects of the years 2006-2008.

Based in the Bahamas but incorporated in the Marshall Islands, Teekay Tankers owns and operates 11 medium-size oil tanker vessels. Previously a part of Teekay Corporation, TNK went public in December 2007. Although it's not a true limited partnership, Teekay Corporation retains a controlling interest in its spun-out subsidiary, and TNK intends to pay out nearly all of its distributable cash flow to shareholders.

Teekay Tankers (TNK)

Market price $5.97

Market cap: $369 million

Shares outstanding: 61.88 million

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Dividend Record: In one word – volatile.

Dividend: $0.21 quarterly, but TNK hasn’t paid the same quarterly dividend twice in the last five years.  Who knows what it will be next quarter?

Dividend yield: 14% ($0.84 annual dividend/$5.97 stock price)

Dividend payout ratio: 386% WARNING ($1.12 dividends last 12 months/$0.29 EPS last 12 months)  The dividends are being paid for by the issuance of new stock shares.  There will be either a massive dividend cut or another drop in the price of the stock as they issue more shares to finance the dividend.

Earning Power:  TNK has an average adjusted earning power of $0.38 EPS @ 61.88 million shares since 2009.

Teekay has more than double the number of outstanding shares in 2010 and it keeps issuing stock.  This highlights the importance of adjusting reported EPS for changes in capitalization.

 

EPS                Net inc.          Adj. EPS        Shares

2006               $2.68              $40.153 M     $0.64              -

2007               $2.76              $40.551 M     $0.66              13.384 M

2008               $2.03              $58.067 M     $0.94              25.000 M

2009               $1.28              $38.934 M     $0.63              28.644 M

2010               $0.37              $14.662 M     $0.24              42.330 M

2011Q1          $0.12             $7.09 M          $0.11              57.39 M

2011Q2          $0.02              $1.44 M          $0.02              61.88 M

Consider a value buy at or below $3.01 per share (8 times average adj. earning since 2009)

Consider an investment buy at or below $4.51 per share (12 times average adj. earnings since 2009)

Consider selling as it becomes speculatively priced at or above $7.52 per share (20 times average adj. earnings since 2009)

Balance Sheet: up mostly due to the issuance of shares of stock

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Book value per share: $9.88

Price to book value: 0.60 (very good)

Current ratio: 1.78 (over 2.0 is good)

Quick ratio: 1.62 (over 1.0 is good)

Financial leverage: 1.73 is low.  This is good

Debt to equity ratio: 0.66 is also good

Conclusion: Wait for a massive dividend cut or a massive price drop down to the $4.51 - $3.01 range.  Then monitor the technicals to spot near the bottom.

Disclosure: I don’t own Teekay Tankers.

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Another risk to AGNC's profitability. Prepayments.

American Capital Agency Corp. (AGNC) profits will erode as the housing market declines further for at least two reasons.  First, Fannie Mae and Freddie Mac payoff the previous mortgage after a foreclosure.  This accelerates the payment of that mortgage within the mortgage backed security pool it is in.  Second, when Federal Reserve policy and the US federal government programs artificially drive interest rates down, then more people can refinance their homes.  The old mortgage gets paid off early (prepayment) in a refinance.  AGNC management must estimate prepayment rates correctly to protect profits.  I have little faith in them because they believe in Keynesian economics.  Keynesians are leading us all off the cliff.

We read in this article that the US federal government is trying to introduce new subsidies to allow homeowners to refinance.  http://seekingalpha.com/article/293341-nationwide-mortgage-refinancing-impacts-on-mreits   This is bad news for mortgage REITs like AGNC.  For more info on the nefarious plans of the government read this: http://www.cbo.gov/ftpdocs/124xx/doc12405/09-07-2011-Large-Scale_Refinancing_Program.pdf

From the AGNC 2010 annual report:

 

Changes in prepayment rates may adversely affect our profitability.

The agency securities in our investment portfolio are backed by pools of mortgage loans. We receive payments, generally, from the payments that are made on these underlying mortgage loans. When borrowers prepay their mortgage loans at rates that are faster or slower than expected, it results in prepayments that are faster or slower than expected on the related agency securities. These faster or slower than expected payments may adversely affect our profitability.

We may purchase agency securities that have a higher interest rate than the then prevailing market interest rate. In exchange for this higher interest rate, we may pay a premium to par value to acquire the security. In accordance with GAAP, we amortize this premium over the expected term of the agency security based on our prepayment assumptions. If the agency security is prepaid in whole or in part at a faster than expected rate, however, we must expense all or a part of the remaining unamortized portion of the premium that was paid at the time of the purchase, which will adversely affect our profitability.

We also may purchase agency securities that have a lower interest rate than the then prevailing market interest rate. In exchange for this lower interest rate, we may pay a discount to par value to acquire the security.  We accrete this discount over the expected term of the agency security based on our prepayment assumptions. If the agency security is prepaid at a slower than expected rate, however, we must accrete the remaining portion of the discount at a slower than expected rate. This will extend the expected life of the portfolio and result in a lower than expected yield on securities purchased at a discount to par.

Prepayment rates generally increase when interest rates fall and decrease when interest rates rise, but changes in prepayment rates are difficult to predict. Prepayments can also occur when borrowers sell the property and use the sale proceeds to prepay the mortgage as part of a physical relocation or when borrowers default on their mortgages and the mortgages are prepaid from the proceeds of a foreclosure sale of the property. Fannie Mae and Freddie Mac will generally, among other conditions, purchase mortgages that are 120 days or more delinquent from MBS trusts when the cost of guarantee payments to security holders, including advances of interest at the security coupon rate, exceeds the cost of holding the nonperforming loans in their portfolios.

Consequently, prepayment rates also may be affected by conditions in the housing and financial markets, which may result in increased delinquencies on mortgage loans, the government-sponsored entities cost of capital, general economic conditions and the relative interest rates on FRM and ARM loans, which could lead to an acceleration of the payment of the related principal. Additionally, changes in the government-sponsored entities’ decisions as to when to repurchase delinquent loans can materially impact prepayment rates.

In addition, the introduction of new government programs, such as the U.S. Treasury’s HASP program, could increase the availability of mortgage credit to a large number of homeowners in the U.S., which we would expect would impact the prepayment rates for the entire mortgage securities market, but primarily for Fannie Mae and Freddie Mac agency securities. These new programs along with any new additional programs or changes to existing programs may cause substantial uncertainty around the magnitude of changes in prepayment speeds. To the extent that actual prepayment speeds differ from our expectations, it could adversely affect our operating results.

Conclusion

Stay away from unstable high dividend stocks like AGNC.  Leverage works both ways – just ask Lehman Bros.

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A First Look at San Juan Basin Royalty Trust (SJT) Yielding 6.1%

First look at San Juan Basin Royalty Trust (SJT).  A reader requested that I take a look at SJT.  I accepted because I hadn’t noticed this company in my previous screenings.

San Juan Basin Royalty Trust is the largest energy sector royalty trust in the United States. It owns a 75% net profit interest in a large number of natural gas properties in the San Juan Basin of New Mexico. About 98% of the royalties San Juan collects come from natural gas, with the balance coming from oil. At year-end 2008, San Juan reported reserves of 158 billion cubic feet of natural gas equivalent.

San Juan Basin Wikipedia entry: http://en.wikipedia.org/wiki/San_Juan_Basin

The future of natural gas: New technologies have dramatically increased the size of natural gas reserves.  More supply at the current price than demand will drive the price down further.  I’m just starting my investigation of natural gas as the follow on fuel after gasoline becomes more expensive.  You must guess correctly on oil’s replacement to make huge profits.  Lobbyists can buy off congressmen to appoint coal, uranium, or any myriad of so-called “green” technologies as the replacement to oil.

Here are some links on the future of natural gas: http://www.google.com/search?q=the+future+of+natural+gas&rls=com.microsoft:*&ie=UTF-8&oe=UTF-8&startIndex=&startPage=1  The New York Times and the Brookings institute are both socialist organizations.  I haven’t read any of these articles yet.

Dividend Record:

SJT has been paying monthly dividends since 1989.  There have been a few monthly gaps.  The stock has dividend gains and cuts almost monthly because it appears to payout 100% of earnings in the form of dividends.

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Dividend: $0.12 per month

Dividend yield: 6.1% @ $0.12 per month

Dividend payout ratio: 100%

            EPS       Net inc.             Adj. EPS            Shares

2006     $2.92    $135.867 M       $2.92                46.61 M

2007     $2.43    $113.221 M       $2.43                46.61 M

2008     $3.07    $143.081 M       $3.07                46.61 M

2009     $0.65    $ 30.173 M        $0.65                46.61 M

2010     $1.68    $ 78.356 M        $1.68                46.61 M

Five year average adjusted earnings are $2.15

Consider buying at or below $25.80 (12 times average adjusted earnings)  SJT is value priced, but its balance sheet stinks.

Consider selling at or above $43.00 (20 times average adjusted earnings)

Strength of balance sheet: Poor and getting worse (You need to understand why the balance sheet is going down.  I haven’t read SJT’s financial statements yet.  I’m guessing that they are constantly depleting the natural gas reserves.  That would reduced their assets year after year.  A careful study is required, but this isn’t good.)

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Book value per share: $0.32

Price to book value: 78.13 (bad - very bad.  Red flag)

Current ratio: 1.00 (greater than 2.0 is good)

Quick ratio: 1.00 (greater than 1.0 is good)

Conclusion: Don’t buy until you understand why the balance sheet stinks.  I will attempt to discover the source of the declining balance sheet.

Disclosure: I don't own San Juan Basin Royalty Trust (SJT).

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When should you sell Terra Nitrogen (TNH)?

When should you sell Terra Nitrogen (TNH) if you own it or are considering shorting it?  Terra Nitrogen's stock price has increased 43.6% in the past year while the S&P 500 has only risen 0.9%.  I don’t know why the stock’s price has rocketed since April 2011.

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http://stockcharts.com/h-sc/ui?s=TNH&p=W&b=5&g=0&id=p33864843115

The stock is currently yielding 8.1% at today's price of $183.38 per share.  It is now paying a $3.75 quarterly dividend on $3.95 in earnings per quarter.  This brings the dividend payout ratio up to a worrying 95%.  I like dedicated dividend payouts of between 50% and 80% (dedicated, but not too high).

TNH has an average adjusted earning power of $9.97 over the past five years.  Consider buying at or below $119.64 (12 times average adjusted earnings).  Consider sell at or above $  $199.40 (20 times average adjusted earnings).  It is almost sell time.

Their balance sheet is strong.  To read the other articles I’ve written on Terra Nitrogen click here: http://www.myhighdividendstocks.com/category/high-dividend-stocks/terra-nitrogen

Disclosure: I don’t own Terra Nitrogen (TNH).

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Safe Bulkers on sale, but wait for the bottom.

 
It suggest that the recent 16% in the Baltic Dry Index is forecasting improvement to worldwide economic conditions.  This is nothing but Keynesian wishful thinking.  Government debt crises all over the world coupled with very high unemployment and massive quantities of fiat money printing will sink economies from here.  I like Safe Bulkers, but you will be able to buy it much cheaper than today.
 
It isn't done going down.
 
 
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An opportunity to pick up Safebulkers (SB) below $7.00 per share (9.6% dividend yield) will come again.

You had your chance to buy Safebulkers (SB) below $7.00 like I recommended: http://www.myhighdividendstocks.com/category/high-dividend-stocks/sb 
 
SB has gained 21% ($6.20 to $7.56) since its 52 week bottom on August 8th, 2011.  Safebulkers was yielding 9.6% at the bottom also.  It didn't expect you to buy at the exact bottom.  If you used my combination of technical indicators: CCI, Bollinger Bands, and MACD then you would have bought on August 14th or 15th at around $7.00 per share.
 
Disclosure: I don't own Safebulkers yet because I'm paying down some debts.  That is using all my free cash flow, but it pains me to miss this opportunity.  I believe that the next crash of the stock market will take Safebulkers down with it and present more buying opportunities.
 
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