Nothing smacks of the super-rich more than the sight of a yacht pulling into harbor, especially one with ten bedrooms and a helipad. For the average investor, it seems wildly out of reach, but is that true? Can you invest in these things? And can you collect dividends?
Boating is perhaps the most cyclical investment sector in the world. Yachts are entirely discretionary, require a vast amount of income to purchase and take up an enormous amount of time. The moment there’s a hint of trouble in the economy, people jump ship (figuratively speaking) and plow their wealth into alternative assets.
For the average person, therefore, it seems like a significant risk.
Most regular investors, however, don’t usually even consider yacht investing. It seems too complicated, niche, and risky. And it isn’t always clear how you can make a return on the darn things, aside speculating on their price rising, which seems unlikely.
But with the coronavirus upending the yacht market, now might be the time to strike.
Think about what’s happened in the current situation. Here we have a virus that is destroying the demand and supply of yachts in the market but potentially increasing rental requests.
Market participants don’t currently know which way things are going to go, so they’re slashing their selling prices and making it easier to get into the market. But people who get in now could benefit from the joint effect of higher rental demand and a collapse in new purchases by billionaires worried about the long-term.
There’s also the fact that between 2015 and the beginning of 2020, the boat building industry boomed. The world’s elites had a relatively rosy view of the future and were willing to part with vast sums of cash to buy enormous yachts that could traverse the Atlantic. There is, therefore, a considerable inventory of hardware, just waiting for people to use is already out there.
The form that dividend investing will take in the yacht market isn’t entirely clear, but it may look like a standard REIT. You buy a small share of the total pie of revenue that a luxury yacht rental generates. Then an agency takes care of things like yacht insurance and bookings. You then get a regular payment in proportion to your initial investment, minus a small fee.
What will happen to the luxury yacht market over the coming years is difficult to assess. The wealthy still have billions of dollars sloshing around in their hedge funds. That’s not going anywhere. And there’s a strong argument that people will use yachts to escape the plague-ridden mainland. People won’t want to take vacations in hotels surrounded by other people. They won’t want to maintain a two-meter distance between themselves and the next person at the buffet. Holidaymakers will want freedom whenever they can get it after the lockdown ends. And that fact alone will make yachts more popular.
There are no guarantees, of course, but dividend investing looks both promising and practical for the average investor.