Costamare Inc.'s (NYSE:CMRE) investors are due to receive a payment of $0.115 per share on 7th of February. This means the annual payment will be 5.1% of the current stock price, which is lower than the industry average.
Costamare's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Costamare's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 58.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from $1.08 total annually to $0.46. The dividend has shrunk at around 8.2% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Costamare has seen EPS rising for the last five years, at 58% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Costamare Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Costamare that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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