Eagle Bulk Shipping Inc. Initiates 19.5% Dividend
January 28, 2022
EGLE Stock Has 100%+ Upside Potential
In this (or any) economic environment, investors want to know if an ultra-high-yield dividend is safe. Payouts are always at the discretion of boards of directors, who base their decisions on the underlying strength of the business. This has led many boards to suspend or cut their dividends during the COVID-19 pandemic.
One ultra-high-yield dividend that seems as safe as possible is the 19.5% payout from Eagle Bulk Shipping Inc. (NASDAQ:EGLE).
The company recently reported record financial results and initiated a dividend policy and share repurchase program. You certainly don’t announce a new dividend policy and then cut it; you announce it because you can afford it.
Eagle Bulk Shipping operates in one of the most in-demand industries, marine shipping. Headquartered in Stamford, CT, with offices in Singapore and Denmark, the company transports dry bulk commodities around the world. Focusing exclusively on the midsize dry bulk vessel segment, it owns one of the largest fleets of Supramax and Ultramax ships in the world. (Source: “Investor Presentation: January 2022,” Eagle Bulk Shipping Inc., last accessed January 27, 2022.)
Eagle Bulk Shipping provides transportation solutions to a diverse customer base. The company typically ships major bulk cargoes (e.g., coal, grain, and iron ore) and minor bulk cargoes (e.g., fertilizer, steel products, petcoke, cement, and forest products).
Eagle Bulk Shipping Inc. Starts Dividend Program
In October 2021, Eagle Bulk Shipping made income hogs sit up and take notice when it initiated a dividend policy and $50.0-million share repurchase program. This followed the closing of a $400.0-million comprehensive refinancing. (Source: “Eagle Bulk Shipping Inc. Announces Dividend Policy, Share Repurchase Program and a USD 400 Million Refinancing,” Eagle Bulk Shipping Inc., October 4, 2022.)
The board expects to pay quarterly dividends equal to a minimum of 30% of the company’s net income and no less than $0.10 per share. Eagle Bulk Shipping stock’s first dividend was based on the company’s record third-quarter financial results.
The refinancing, which closed on October 1, 2021, has significantly improved the company’s capital structure and has increased its financial flexibility. The refinancing has resulted in the reduction of approximately $8.0 million in annual interest expenses. It has also extended the company’s nearest bank maturity to the end of 2026.
Eagle Bulk Shipping Inc.’s CEO, Gary Vogel, commented, “Today’s announcement is the culmination of a five-year transformation of Eagle that has resulted in a substantially larger and more efficient fleet, as well as a stronger balance sheet. As we plan to take delivery of the 29th vessel acquired during this period, which was purchased in May, we are pleased to be in the position to start returning capital to shareholders.” (Source: Ibid.)
Record Q3 Net Income
During the third quarter of 2021, Eagle Bulk Shipping reported record net income of $78.3 million, or $6.12 per share. Its adjusted net income in the quarter was $72.1 million, or $5.63 per share. Not only was this its highest quarterly net income, but it also trounced the company’s best annual net income. (Source: “Eagle Bulk Shipping Inc. Reports Record Results for the Third Quarter of 2021,” Eagle Bulk Shipping Inc., November 4, 2022.)
Eagle Bulk Shipping also reported third-quarter net revenue of $183.4 million, up by 168% from $68.2 million in the same prior-year period.
The company is set to exceed its record third-quarter performance and is on track to pay even greater dividends.
Eagle Bulk Shipping Stock Could More Than Double in Value
Eagle Bulk Shipping Inc.’s wonderful financial results and strong industry tailwinds have helped propel EGLE stock 123% higher over the last year.
That momentum is expected to continue. The company’s record financial results and excellent outlook have resulted in Wall Street providing a very bullish forecast for Eagle Bulk Shipping stock.
Of the analysts providing a 12-month share-price target for EGLE stock, their average estimate is $78.75 and their high estimate is $86.00. This points to potential upside of 88% and 105%, respectively. Even the low estimate of $65.00 suggests upside of 55%.
Chart courtesy of StockCharts.com
The Lowdown on Eagle Bulk Shipping Inc.
Eagle Bulk Shipping Inc. seems to have everything going for it right now.
Eagle Bulk Shipping stock has made triple-digit gains over the last year, the company’s record third-quarter earnings topped its best annual results, the company strengthened its balance sheet, and management initiated a new dividend policy and share repurchase program.
