COVID-19 recovery investors who are chasing after airline and cruise stocks may have missed Costamare Inc. (CMRE), the world’s leading owner of charter containerships. The company’s shares are up 45% in 2021, reflecting soaring shipping rates.
The company was founded in 1975, and has a fleet of 81 containerships, with a total capacity of over 581,000 twenty-foot equivalent units (TEUs). That includes 11 new-build containerships on order.
Costamare also controls 37 dry bulk vessels, with a total capacity of approximately 1.9 million deadweight tonnage (DWT). (See CMRE stock charts on TipRanks)
Strong Technicals and Fundamentals
TipRanks assigns a Smart Score of 10 to the company’s stock, citing an improvement in the company’s technicals and fundamentals.
For Q2 2021, Costamare reported a net income available to common shareholders of $82.8 million or $0.67 per share, beating analyst estimates.
What makes Costamare such a good investment are its conservative business model and substantial dividends. The company relies on long-term leases in lieu of spot rates, limiting its exposure to fluctuations in shipping rates.
The company also chartered 10 containerships and seven dry bulk vessels in Q2, securing higher daily rates with each new long-term contract. The new deals are expected to generate incremental contracted revenues of more than $830 million over the next five-plus years.
These contracts will certainly boost Costamare’s bottom line going forward, setting the stage for an explosive upside in its shares.
Investors can also expect a dividend yield of around 4%. Not bad, compared to the industry average of 1.25%.
Wall Street’s Take
Despite the dividend and promising outlook, the company has a little following in the analyst community, which deems Costamare a Strong Buy overall.
Only three analysts have followed the stock in the last three months, all of whom have given it a Buy rating.
The average CMRE price target of $14.83 for the next 12 months implies 21.9% upside to current levels, with a high forecast of $17 per share and a low forecast of $13 per share.
If the company continues to beat market expectations, more investors might jump on the bandwagon. Should such a situation arise, you can expect a further rally in the company’s shares.
Summary and Conclusions
Costamare is an investment gem yet to be discovered on Wall Street, riding the rebound in the world economy, which has pushed containership leases sky high.
Moreover, it does so with a conservative business model, limiting the downside risk if things turn in the wrong direction.
Disclosure: Panos Mourdoukoutas owns shares of Costamare.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
