A interesting bit of info for those who have DSX or other dividend stocks

Evaluating dividend stocks
Posted Jan 29th 2007 3:24PM by Zac BissonnetteFiled under: Technical Analysis
Several weeks ago, I wrote a piece about how I feel about dividends as a matter of principle: I strongly believe that share buybacks and paying down debt are much better ways for companies to increase shareholder value. However, some investors cling to the (illusion of) safety created by dividends, and so I'm going to provide a few pointers on how to evaluate dividend-paying stocks. When evaluating stocks for income, we want to examine the size of the yield, the sustainability of the yield, and potential for capital appreciation. Generally, it's very hard to find stocks with large sustainable yields and the potential for capital appreciation, so you will probably have to settle for two of the three.
For the purpose of this tutorial, we will be evaluating three stocks: The Altria Group (NYSE: MO), The Boulder Growth and Income Fund (NYSE: BIF), and Diana Shipping (NYSE: DSX).
Evaluating the Size of the Dividend: This is the easiest part. This consists of dividing the total value of the dividends each year by the current share price. This gives you a percentage. MO has a yield of 3.91%. DSX has a yield of 10.03%, and BIF has a yield of 11.85%. So the Boulder Growth and Income Fund is offering the largest dividend, but all three are solidly above the 1.52% yield of the average S&P 500 stock. (Source: indexarb.com.)
Sustainability of the Yield: To understand whether the stock is safe as an income investment, you need to ask the question: How likely is the company to be able to continue to pay, or even increase, its dividend? The payout ratio will serve as a quick litmus test of sustainability. According to Capital IQ, MO has a payout ratio of 59%, which means that it pays 59% of its earnings back to shareholders. So, assuming that MO's earnings will not decline rapidly, the dividend appears to be safe. DSX has a payout ratio of over 200%, which means that it pays more dividends than it earns. However because it is a shipping company, DSX has large depreciation expenses, and its policy is to pay nearly all of its cash flow out as dividends. The company is largely dependent on the spot market for leasing out its ships, so its future earnings can be somewhat unpredictable. BIF is a closed-end fund and its policy is to pay out a dividend of 10 cents each month, regardless of earnings. Of course, in the long-run, the fund will not be able to pay out a dividend if it isn't able to earn that amount on its investments.
Potential for Capital Appreciation: This is where you evaluate whether, in addition to the dividend, the stock itself will have a good chance at appreciation. This is also closely tied to the payout ratio. A company that is paying a large portion of its earnings back to shareholders may not have the money to expand the business. Generally, there's a trade-off. A company that returns cash to shareholders will be forgoing opportunities to reinvest in the business, and so the share-price may have less potential for appreciation. In the case of DSX, an increase in the amount the company is able to collect for its ships will increase the earnings and therefore the dividend, and therefore the yield, and therefore the stock price.
So these are the three important factors to consider when investing for income. While I remain steadfast in my opposition to dividends as a matter of corporate governance, some investors may still want to invest in dividend-paying stocks.