I'm Putting Real Money on Seaspan

Tomorrow my Special Situations portfolio will buy shares of Seaspan (NYSE: SSW) , a growing containership company that pays a huge and increasing dividend. I've purchased shares before in this portfolio and I own them in my personal account as well. I think the market is vastly underestimating what this company can do, and I'm looking to take advantage of that. Motley Fool Hidden Gems has made a killing on this stock, and I'm adding more while it looks cheap.

What's changed?
In my original write-up I explained what I liked about Seaspan -- namely, its "progressive" dividend policy that has the potential to double shares or more. The company has built out a fleet of containerships on long-term contracts and then pays out the dividends to investors.

So what's changed at Seaspan since I bought last year?

Well, the company has rapidly expanded cash available to common stockholders. In the second quarter, cash available for distribution was $76.4 million -- an increase of nearly 43% from the year-ago period. If we take that as an annualized run-rate, Seaspan should generate nearly $306 million.

Contrast that against its annual dividend of $1 per share on 63 million shares, for a $63 million total payout. So Seaspan is paying out just 20% of its distributable cash flow. I expect that to increase quickly, given management's promise of a progressive dividend payout and some high insider ownership.

The company announced an increase in its dividend in late February when it announced annual results. I expect a similar occurrence in February 2013. A 40% payout would double the dividend -- and hopefully the stock -- and still be a reasonably safe payout ratio.

But there's more to love about this company.

Insider buying
Seaspan has opportunistically repurchased shares, one move that I love to see. In the last six months, the company has bought nearly $170 million of its own shares. That's huge for a company with a market cap of just $1 billion. I'd love to see another opportunistic tender offer that we saw earlier this year.

Plus we have had some new insider buying recently. Tiger Group Investments owns 8.2% of shares after adding nearly 107,000 shares in the $16 range to its stake of nearly 5 million stubs. Tiger's chairman Graham Porter co-founded Seaspan and continues to sit on its board, so he probably knows something about how Seaspan is performing.

With all these interesting and positive developments, my Special Situations portfolio will buy $1,000 of Seaspan shares tomorrow.

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