This 8% dividend yielder will hit the upper end of expectations. Should I buy?

I always find dividend yields above 7% to be disconcerting because I worry that the stock’s underlying business might be in trouble. If that proves to be the case, maybe the generous dividend payment is in danger of being slashed.

So I was a bit wary of the 8%-plus dividend yield on offer from Global Ports Holding (LSE: GPH), but in today’s half-year report, the company held the interim dividend at last year’s level and told us that it expects full-year results “towards the upper end of expectations.” The shares are perky on the news, up around 4% as I write, so maybe I should invest in this company right now.

Growth is on the agenda

The company describes itself as a  “the world’s largest cruise port operator” with a presence in the Mediterranean, Caribbean, Atlantic and Asia-Pacific regions. Its cruise ports serve liners, ferries, yachts and mega-yachts. And the firm sees itself as a consolidator in the industry with investments in 14 cruise ports and two commercial ports spread across nine countries. Operations currently serve around 7m passengers a year and there’s also a commercial port specialising in container, bulk and general cargo handling.

The pursuit of growth is on the agenda but it hasn’t always been plain sailing, so to speak. Last year, earnings dipped into the red but that was “almost fully attributable” to the one-off costs associated with the firm’s May 2017 initial public offering (IPO). The directors designed the company’s arrival on the stock market to further the growth vision and it delivered additional resources to “cultivate new territories and opportunities, as well as to invest in our existing infrastructure.” Last year also saw the arrival of the first public dividend, set at the mouth-watering level we see today.

Today’s figures are encouraging. Constant currency revenue lifted 7.5% compared to the equivalent period last year and underlying profit moved 8.5% higher. During the period, Global Ports signed an agreement to operate Havana cruise port, which is its first in the Americas. It was also awarded port operating rights for Zadar Gazenica cruise port in Croatia and signed a partnership agreement with Dreamlines, which is a fast-growing online travel agency for cruises. The growth strategy appears to be rolling out well alongside some encouraging like-for-like figures from existing operations.

Earnings going higher

Chief executive Emre Sayin said in today’s report that the firm has seen a “record performance in the first half of the year,” which has been fuelled by “good” organic growth. He explained that passenger volumes at the firm’s cruise ports have been “strong” and there has been “robust” growth at the company’s commercial ports. The outlook is positive and City analysts following the firm expect earnings to move firmly into the black this year with an uplift of around 20% in 2019.

I know there will be an element of cyclicality to operations but things seem to be going well right now. On balance, I think the firm’s attractive dividend and growth prospects make Global Ports Holding well worth my further attention.