How Costamare's Steep Dividend Cut Earned It An Upgrade From JPMorgan

JPMorgan has upgraded Costamare Inc (NYSE: CMRE) shares from Neutral to an Overweight rating and lifted the target price from $12 to $13 on the stock implying over 70 percent upside potentials. The firm believes the dividend cut from $0.29 to $0.10 has removed the overhang hampering the stock movement.

Analyst Noah Parquette expects the company to generate stable cash flow in the current and next year with its focus on smaller vessel classes. The management's move to reduce dividend rate could also free up cash flow to improve liquidity. Furthermore, the analyst sees the need for cash requirement lower with the DRIP program and founding family's participation.

Although the dividend cut came in as a surprise, the brokerage admitted that the cut is sensible, improving the liquidity issue in the medium term. The firm expects cash requirements to be only $3 million for dividend compared to $22 million previously.

Related Link: Costamare Cut Its Dividend By 65% And Stock Fell 19% Tuesday

In a research note, the analyst stated, "The company also announced it refinanced $360 million of bullet payments that were due in Q2 and Q3/2018. While there are still two smaller bullet payments in 2018, the fact that these refinancing were down well ahead of the maturities gives us confidence that the remaining refinancing should be relatively routine."

JPMorgan boosted its estimates following changes in dividend and new financings.

At last check, Costamare was up 1.78 percent at $7.45 on the day.

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