Costamare's Preferred Shares Dividend Under-Girded By Strong Economics

The IMO regulation means that tankers need to slow down in order to make their journeys in a fuel efficient manner.
While scrapping rates have bottomed out, this has meant that tanker availability has fallen.
This has translated into a higher baseline of charter rates while capacity has years till it's caught up.
Now in the COVID-19 environment, preferred shares are an excellent choice for reliable exposure to Costamare's improved cash flows while weathering current pressure on charter rates.
By Felipe Bijit
Costamare's (CMRE.PE) preferred shares offer something very interesting in today's markets: substantial and reliable yield. Under-girded by an industry with fundamentally improved economics due to IMO regulations, evident in massive charter rate growth last year, Costamare's preferred shares offer a yield above 9% from a business that will be sustained by long duration charters and a robust business backlog with limited counter-party risk. With lockdowns of important port areas now over, their ships are entirely fundamental to the workings of global trade. Owning a mid-sized fleet also protects them from secular risks that might impact larger trading vessels, which could become less efficient on average if activities are on-shored in lieu of vulnerabilities revealed in globalized networks. Trading below pre-COVID-19 levels, implying the debt-equivalent of a CCC+ rating and non-negligible default probability for a security covered by a healthy business, we think that Costamare's Series E preferreds are undervalued, and should be pounced on for that fantastic yield.
IMO and Charter Rates
IMO 2020 is a regulation that is aimed at reducing pollution from tankers and other shipping vessels. This has caused a huge decline in demand for high-sulfur fuel which, in most tankers, produces harmful SOx emissions above what is permitted by the IMO 2020 regulations. It has also caused a demand for scrubbers to be able to make vessels that use... Read more