Why You Might Be Interested In Costamare Inc. (NYSE:CMRE) For Its Upcoming Dividend
It looks like Costamare Inc. (NYSE:CMRE) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Costamare investors that purchase the stock on or after the 19th of July will not receive the dividend, which will be paid on the 6th of August.
The company's upcoming dividend is US$0.115 a share, following on from the last 12 months, when the company distributed a total of US$0.46 per share to shareholders. Calculating the last year's worth of payments shows that Costamare has a trailing yield of 3.0% on the current share price of US$15.18. If you buy this business for its dividend, you should have an idea of whether Costamare's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Costamare
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Costamare has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether Costamare generated enough free cash flow to afford its dividend. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Costamare's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Costamare has grown its earnings rapidly, up 51% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Costamare has seen its dividend decline 8.2% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Should investors buy Costamare for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Costamare paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 4 warning signs for Costamare (2 don't sit too well with us!) that you ought to be aware of before buying the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com