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Summary

  • Common stock of Costamare pays a 4.8% dividend, a healthy bonus to the stock appreciation.
  • The preferred shares are paying 7.625% and 8.5%, an even better rate for a solid company.
  • Going forward, there is little risk to the dividend as the company states sustainability is a top priority.

The shipping industry as a whole was beaten down due to the global recession and has slowly recovered. Shipping companies have been notoriously good dividend payers, however, most of that stopped around 2009/2010. Costamare Inc. (NYSE:CMRE) is one of those companies that has weathered the storm well, and has been rewarding investors with a handsome dividend.

Costamare Inc. announced the continuation of their dividend for common stock, Series B and Series C and reported earnings on July 24th. Over the course of the quarter, the company has continued to make headway as the global economy continues to recover. The company reported $79 million in EBITDA and EPS of $.48.

Costamare owns and charters containerships to liner companies worldwide and manages a fleet of 58 containerships with a total capacity of approximately 329,000 twenty foot equivalent units. The company currently trades at $22.64 after a pullback from just over $24, with a market cap of $1.7 billion.

(click to enlarge)

Fundamentally, the company is looking good going forward. It has continued to grow equity in the business by increasing assets faster than liabilities.

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(Source: data compiled from ihub)

The company has chartered their ships with some of the largest sea-transportation companies, and has a predictable stream of income going forward. While the company does have some extremely short-term leases (3-5 months), it also has some ships that are on long-term contract for up to another 10 years. The average contract length is currently just over 3 years.

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(Source: company presentation)

The Dividend

During 2013 the company faced a cash shortage and had to go back to the well to strengthen the balance sheet. The result was two offerings of Series B and C preferred stock:

  • Series B was issued on August 1, 2013 for $25 per share with a total of 2 million shares being sold and $50 million being raised. Tied to this issuance was a dividend of 7.625%.
  • Series C was issued on January 14, 2014 for $25 per share with a total of 4 million shares being sold and $100 million being raised. Tied to this issuance was a dividend of 8.5%

So while the common stock is paying a 4.8% dividend, those who can pick up the Series B and C will see a 7.625% or 8.5% rate.

(click to enlarge)

(Source: data compiled from ihub)

The continuation of a dividend is always a risk, however with the case of Costamare, it doesn't appear likely the company will discontinue paying it. During the conference call, the point was made that going forward "the dividend remains sustainable as it is now."

Conclusion

Costamare is well run and has a predictable cash flow for the foreseeable future. While the dividend on the common stock is good at 4.8%, the preferred shares are much more attractive. The recent pullback should be a good entry price as the company continues to grow.

Source: Costamare Inc. Has A Great Dividend (If You Get The Right One)