Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

September 8, 2010 - Teekay Corp. (TK-NYSE) provides crude oil and petroleum product transportation services in Bermuda and internationally. The company's Shuttle Tanker and FSO (Floating Storage and Offtake) includes shuttle tankers and FSO units for providing transportation and storage services to oil companies operating offshore oil field installations primarily in the North Sea and Brazil.

Teekay Corporation's Liquefied Gas segment consists of LNG and LPG carriers. Its Conventional Tankers segment includes conventional crude oil and product tankers operating in the spot charter market, and consists of Aframax, Suezmax, and large and medium product tankers that are employed on long-term time-charters.

The company has a fleet of 150 vessels. As of March 31, 2010, it had four shuttle tankers, one LPG carrier, four LNG carriers, and two multi-gas carriers under construction. The company was founded in 1973 and is headquartered in Hamilton, Bermuda.

One thing to know right away about the shipping business: earnings are volatile, shifting dramatically year to year. For TK, in 2004, it made $8.63 a share, followed by $6.83, $3.61, $2.39. In 2008, it lost $1.18 a share. Last year, it made $1.77. This year, analysts predict a loss of $2.50 a share, then a profit of $1.30 next year. Can you say erratic?

Much of that improvement came from Brazil, the hottest offshore oil market in the world. Teekay is sending more ships to take advantage. It recently re-signed a contract for an FPSO for 7.5 years, starting in November with rates 20% higher than the expiring contract. TK also won the bid for another FPSO project in Brazil that takes effect in 2012. Another contract was recently signed in the North Sea that will generate an additional $35 million over the current agreement.

While those two regions show strong demand, many others don't. Spot tanker prices have been down recently. The third quarter will most likely show a loss of 70 cents because of lower rates but also from high maintenance charges for FPSO ships. Expect better numbers in the fourth quarter, 38 cents a share, because of seasonal rate hikes. If OPEC increases production in 2011, look for even higher rates. But that will also bring in new ships and added competition.

More numbers: Market Cap is $1.9 billion. Forward P/E is 20. Price to sales ratio is .87. Price to book is .91. Book value is $28.09. In the last 12 months, Operating margin was 12.73% while Profit margin was negative 13.11%. Return on equity was negative 12.84%. Revenues were $2.13 billion. There's $641.47 million in cash for $8.79 a share. Total debt is $5.13 billion. Current ratio is 2.48.

One other positive note about TK: two of its subsidiaries recently raised equity capital. The funds will be used to buy certain assets from TK which will then use the new capital to pay down debt.

Income investors with a belief that oil prices will rise will find this stock of interest. Increasing oil production will create more demand for tankers but also attract more competition. But TK is well positioned in one of the hottest markets and has a long term contract at favorable rates. This stock takes much more research to get comfortable with as well as a knowledge of the shipping business. It takes more digging to make
an informed decision on TK. It's most likely worth the effort.

- Company Web site: www.teekay.com