After the recent, highly publicized crash of the Costa Condordia, people around the world are looking hard at the cruise vacation industry. While everyone is focusing on the problems today, it might be a good place for you to invest for tomorrow.
Costa, a cruise line that I have traveled on twice, is owned by Carnival Corporation (NYSE: CCL). Carnival is known for running cruises under the brands Carnival, Costa, Holland America, Princess, Seabourn, AIDA, Cunard, Ibero , and P&O Cruises. Carnival owns a tour company, 15 hotels, 395 motorcoaches, and 20 rail cars.
The brand owns dozens of ships around the world complete with casinos, bars, night clubs, excursions, and dozens of other ways to make money. Of course, running a cruise line is not cheap. The company is operating floating hotels that require fuel, staff, entertainment, maintenance, and regulatory adherence.
The company earned nearly $16 billion in revenue in fiscal 2011 and had earning per share of $2.42. The company issued a $1.00 dividend in 2011, which is about 3% of the investment value. Even better, if you are a regular cruiser, if you own 100 shares of CCL stock, you get a shipboard credit of $50, $100, or $250 depending on the length of your trip on all Carnival brands.
Royal Caribbean Cruises Ltd. (NYSE: RCL) is another Florida based cruise operator best known for its flagship Royal Caribbean branded cruises. Royal Caribbean operates more than 40 ships under the brands Royal Caribbean, Celebrity Cruises, and Azamara Club Cruises in North America. Pullmantur operates in Spain, Portugal, and Latin America and its CDF Croisieres de France serves the French market. It is also a 50% owner in a German based cruise operator.
Royal Caribbean pulls in an annualized $9.2 billion in annual revenue based on its most recent quarter. It pays a 1.4% dividend and offers a similar shipboard credit to Carnival.
While the company looks to be in a cash flow crunch on its most recent earnings release, I believe the long term prospects for this company are bright, just like Carnival, as the economy continues to improve.
A Sunny Future?
Having been on four cruises myself, I can tell you that good weather means everything for an enjoyable cruise. Likewise, a good economy means everything for a tourism company.
Recent economic reports show that consumer spending and confidence is growing. While unemployment slowly decreases, tourism will pick up steam. As long as we stay on track for economic recovery, I think you can expect these investment opportunities to perform very well.
If you are nervous about cruises but want to invest in other tourism companies, be sure to look into the hotel and casino industries. I believe they will have similar results as the economy expands and will all offer a good opportunity for solid investment gains.
Have you ever invested in cruise companies or tourism based stocks? Do you think I am right? Please share your thoughts and experiences in the comments below.
Image by Accidental Hedonist.