Dear Income Investor,

I know a number of you had trouble viewing my special One Stock Every Income Investor Show Own Now video post. We did manage to get it fixed for a number of viewers, but not everyone, so I apologize.

Here is the write-up that I used in the Video. I apologize for any problems this may have caused. I still like the investment. Nothing has changed there.

Thank you for your patience.

Bryan

Diana Shipping (DSX)

Every time I read a story about the future economic growth rate of China and India, I feel like we are way too underexposed to the potential rewards offered by such a "big-picture" macro trend. Both China and India possess enormous opportunities for investors, but few of those opportunities pay anything close to a double-digit dividend yield. That makes it a bit of a challenge for me to find suitable high-yield Chindia (a new word created by combining China and India) investments that fit our25% Cash Machine profile -- but not impossible.

Enter the dry bulk shipping stocks.

This relatively new asset class is a direct beneficiary of increased global trade. It specifically benefits from raw materials shipped to Chindia.

In fact, one of the first recommendations in my 25% Cash Machine Online Seminar last year, was Eagle Bulk Shipping (EGLE) that has provided us with a 23.51% total return in 2006. The business conditions are steadily improving as Chindia's build-out continues, and my view is that it will continue for the next 10 years, easy!

Here's the basis for my decision to go with Diana Shipping.

Diana Shipping is incorporated in the Marshall Islands, with principal executive offices in Athens, Greece. It completed an initial public offering (IPO) on March 23, 2005, and its shares are traded on the New York Stock Exchange under the symbol DSX.

COMPANY PROFILE

Diana Shipping is a global provider of shipping transportation services. They specialize in transporting dry bulk cargoes, including iron ore, coal, grain and other similar commodities along worldwide shipping routes. Their combined fleet consists of 13 modern panamax dry bulk carriers and two cape size dry bulk carriers, with a combined carrying capacity of approximately 1.3 million deadweight tonnage (DWT) measured as a long ton and equal to 2,240 pounds. The weighted average age of the vessels is 3.6 years (as of Dec. 1, 2006) without taking into account the two vessels to be delivered in 2010. So DSX has one of the youngest fleets in the dry bulk cargo business.

Among the distinguishing strengths that provide DSX with a competitive advantage in the dry bulk shipping industry are the following:

* They own a modern, high-quality fleet of dry bulk carriers.
* Their fleet includes four groups of sister ships, providing operational and scheduling flexibility, and cost efficiencies.
* They have an experienced management team.
* They have a strong balance sheet and a relatively low level of indebtedness.

The main objective of Diana Shipping's business model is to manage and expand their fleet in a manner that will enable them to pay attractive dividends and enhance shareholder value.

To accomplish this objective, DSX intends to pursue highly focused business strategies, including:

* Operating a high quality fleet.
* Strategically expanding the size of their fleet.
* Pursuing an appropriate balance of short-term and long-term time charters.
* Maintaining a strong balance sheet with low leverage.
* And maintaining low-cost, highly efficient operations.

In addition, they intend to capitalize on their strong reputation for high standards of performance, reliability and safety. Strong leadership is a hugely important component for success in this industry and Simeon Palios has served as DSX director since Mar. 9, 1999, and CEO and chairman since Feb. 21, 2005.

Since 1972, when he formed Diana Shipping Agencies S.A., Palios has had the overall responsibility for the company's activities. He has 39 years experience in the shipping industry and expertise in technical and operational issues. Palios served as an ensign in the Greek Navy (as a passenger boat inspector), and is qualified as a naval architect and engineer. What credentials! He da' man!

YIELD POWER

Diana is throwing off some serious cash flow. As stated in their IPO-offering prospectus, the company intends to pay out all its cash flow to shareholders after meeting the company's operating expenses. Last quarter alone, the company generated 40 cents per share in free cash flow. Take the 40 cents and multiply it by four quarterly dividend payments, and we come up with an annual dividend payout of $1.60 per share. And that translates into a current dividend yield of 10.50%.

I want to see improving fundamentals that justify the notion of future dividend hikes, and capital appreciation that has the potential to deliver a total yearly return of 25%. Diana's recent performance suggests to me that the company can attain that goal for us in 2007. Just look at the most recent numbers and the company's observations from their third quarter results posted back in November 2006.

Voyage and time charter revenues were $30.6 million for the third-quarter of 2006, compared to $25.8 million for the same period of 2005, representing a top line growth rate of 18.6%. This gain was due to an increase in the number of vessels in the company's fleet, which was partially offset by decreased hire rates.

Earnings per share (EPS) have continued its positive trend during the first three quarters of 2006. EPS rose to 32 cents (U.S.) in the third quarter, up from 28 cents in the second quarter and 26 cents in the first quarter. The rising tide of profits has resulted in DSX being able to increase the dividend for the third-quarter 2006 to 40 cents from 35.5 cents per share paid out from second-quarter 2006 operations.

One important note: The 32 cent EPS is calculated after deducting tax write offs of 8 cents per share. DSX generated 40 cents per share in free cash flow. Deduct the 8 cents for depreciation and amortization and you get 32 cents in earnings. So, in case you were wondering, they are neither borrowing money nor paying out more than they earn.

Looking forward, a consensus of eight Wall Street analysts see DSX revenues climbing from $110 million in 2006 to $141 million in 2007 -- a 28% growth. Diana is enjoying profit margins of approximately 52% of revenues, making this a cash cow for 2007 as long as day rates hold relatively stable. If expenses remain constant, or become a smaller percentage of revenues, then I expect the company to raise the dividend payout further during the course of the year.

SECTOR STRENGTH

In a recent 35-page report released in late November -- and based on a roundtable of six Wall Street analysts that follow the dry bulk shipping sector -- they found some particular business elements to be very favorable. They all tend to agree that the real driver is the intense demand for shipping, especially from China. The consensus forecast dry bulk order book -- a continuous measure of supply versus demand -- shows demand exceeding supply during the next five years.

One analyst from Lazard Capital Markets said it well. "It's not that tough of a business to analyze from the perspective that it takes a long time for ships to get delivered. It takes a lot of money for them to get ordered, asset prices are at all-time highs and staying up there, and charter rates are still quite good going forward."

Diana Shipping has 60% of their charter rates locked up for 2007, leaving another 40% open to what is called "spot market pricing," or day-to-day pricing. This simply means that the company has fixed its pricing for 60% of its fleet for one year or longer. But if day rates for hauling cargo overseas rise, as I believe they will, then the company stands to benefit from the 40% of its fleet capacity that is not committed to long-term contracts.

This is where the big pop in sales and profits for 2007 should come from -- by scaling into what should be higher day rates and raising overall average daily charter revenue for DSX.

Buy Diana Shipping (DSX). Buy it here and buy it now