Who is happy with cheap gas? I know I am. You know who likes cheap gas probably a little bit more? Cruise Ships. Cruise ships can use 300 gallons per mile. If your car gets 25 MPG, a cruise ship can use 7,500 gallons in 25 miles. In a year, at 20,000 miles of driving, you will use 800 gallons. If you save $1 per gallon, you will save $800. That has nothing on a cruise ship. A cruise ship can travel 200 miles in one trip. If they save $1 a gallon, that will add up to $60,000 in one trip. I believe oil will stay cheap for a while. Even when it goes back up after finding a bottom, it probably will be a while before we see oil over $100 a barrel again. Let’s go on a dividend cruise.
With so much savings in fuel, we see nothing but good things. Flu scares keep happening, with the current ones being the Zika flu virus. Other issues will also come up, being an international operating company. However, cheap raw materials, in this case oil, can fix a lot of problems. With the extra cash flow, it will allow a lot of positives things to happen. Such as fixing up the balance sheet, repurchasing shares, paying extra dividends, buying more ships, and a lot of other smart things. Hopefully, they do not waste the extra money.
With oil being so cheap, we are looking at our best of breed cruise line, Carnival (CCL). In 2014, they earned 1.96 per share, and this was the start of lower oil prices. In 2015, their earnings were $2.70, growing 38%. Next in 2016, the prediction for earnings is $3.36 per share, or another 24% growth. This would make the future P/E ratio of 13.4, which is a reasonable PE.
Carnival (CCL) has been on a tear. It was trading in the $18’s during its 2009, and tripled in price to a high price of $54 in 2015. With even cheaper prices in oil, Carnival (CCL) is 17% off of it 52-week high. With the correction in stock price, this seemed like a good point to join the train, I mean cruise ship fun.
What we Bought
We bought 6 shares of Carnival (CCL) for $277.05, including those total tubular commissions. We will earn $7.20 a year in dividends. With the growth in cruise lines and cheap oil, we expect many good things to come, including increases in dividend payments.
Who wants to go on a Dividend Cruise around the World? What do you think of Carnival (CCL) for our collection? The comment section is below.
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Discloser: Long CCL