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Capital Product Partners L.P. (CPLP)

NasdaqGS - NasdaqGS Real Time Price. Currency in USD
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15.13-0.54 (-3.45%)
At close: 04:00PM EDT
15.13 0.00 (0.00%)
After hours: 07:29PM EDT
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  • Y
    Yahoo Finance Insights
    Capital Product Partners L.P reached a 52 Week high at 17.17
  • Y
    Yahoo Finance Insights
    Capital Product Partners L.P reached a 52 Week high at 18.89
  • Y
    Yahoo Finance Insights
    Capital Product Partners L.P is down 5.61% to 14.82
  • G
    George
    A glance at the chart going back to August 07 shows clearly that this company gives serious consideration in returning value to shareholders via the payment of generous dividends.
    This is my take on a brief review of the companies action since the onset of Covid. Just prior to this event management raised the quarterly dividend from 31.5 cents to 35 cents. The virus became front and center and management played it super safe as is their nature and reduced (slashed) the dividend to 10 cents, citing the need to fund future growth by internally generated cash on hand in the event bank lending dried up. Also, I believe that 4 vessels were coming off lease over the next 6 month period and that reset rates were in question at that time. Since that time, the resets have taken place at much higher levels than anticipated by management and cash on hand is collecting nicely. My expectation was that management would raise the dividend to 20 cents per quarter during Q4 since the cost would have been $3.7 million giving them 2 times coverage for the period. Instead, management felt that the shares were seriously undervalued and that we shareholders would benefit more by a $30 million share buy back than an increased 10 cents per quarter. There is little doubt in my mind that over the long term this will lead to significantly higher dividends. My expectation is that within 6-12 months the quarterly dividend will be raised to 35 cents and that the share price will be in the $16-$20 range. $16 w/o any additional drop downs, $20 if two more vessels added to the fleet. My opinion, easily doable.
  • m
    martin
    Stress test on CPLP Div...

    No-one knows if Board will cut dividend, from the current $1.40/sh ($30M) annual.

    Their coverage ratio of 1.6 indicates some flexibility to ride thru uncertainty in their end markets. They have about $12M extra cash flow, above their costs, reserves, and div.

    They have 4 vessels needing re-charter (1 CAPE dry, 3 modern large Container), having current average hire rates of about $40K/day.

    Here is a stress test that we can easily apply to see the security of their payout.

    Assume those vessels rehire at $20K/day on average. That would reduce their annual income by $30M, or roughly equal to their current entire div payout. Even taking into account the current modest excess annual cash flow of about $12M, their div would not sustain such a stress.

    Another scenario is that the Cape is marketed for sale, with the eventual sale price eliminating the debt held on that vessel. Their 3 large container vessels recharter at $30K/day rates on multi-yr contracts - their annual revenue would decline $25M.

    That too would demand a sizable reduction in dividend.

    If they were comfortable with a minimum 1.2 coverage, then the dividend under this second scenario would be reduced by about 1/2.

    Now there are other moving parts in their portfolio, including debt re-fi at lower rates, increased COVID-related costs, charter rate adjustments for scrubber installations, etc. But those are going to be at the margins.

    It seems reasonable to assume that Board won't take he div down in increments, moves that have hurt share value and investor confidence in other MLP shippers.

    Rather they will ripe the bandaid this week, and probably cut the div by 50%, and maybe 75% if they perceive the need for excess caution around COVID economics.
  • m
    martin
    Now yielding 20%....obviously the share drop today is indicating that some investors see a div cut.

    But short of the charterers on their many long-term secured contracts looking to rescue the rates on those (quite unlikely...), their only Cape whose contract expired this month was long known to be facing either sale, or spot market rates at much lower income. There has been some strength recently in spot Container shipping rates, and they have one vessel coming off of contract in August...which too will likely see a reduced re-hire.

    But none of that is new, and those events don't necessarily entail a div cut given other factors like increased rates in their contracts after scrubber install (all done...), and their recent fleet expansion.

    The market is acting as though CPLP will be cutting div by 50%, implying a yield after cut of about 10%.
  • G
    George
    Yesterday's announcement of the pending sale of two of our container ships just highlighted how under valued our share price is. In the past, management has compared our performance to some of our peers, (CMRE, DAC, GSL and ATCO). CMRE is currently trading at .89 per cent of book value, DAC is 1.05 BV, GSL is 1.06 BV and ATCO is .97 BV. When management announced the share buy back I believe we were trading at approximately 36 per cent of BV. Yahoo is currently showing us at 50 per cent of BV. In my mind, management is pursuing the right course by buying back undervalued shares, BUT, because of our ample cash on hand, ( $47 million last reported), which will be soon added to when the pending sale is completed, I think the company is in position to fully reinstate the 35 cent quarterly. We'll know soon, managements decision.
  • G
    George
    Q1 results out and a solid beat, top and bottom line, ( 40 cents expected, 57 cents delivered. The company repurchased 133 thousand shares up to the end of the quarter and had repurchased 168 thousand up to the conference call. It's a tough slog repurchasing because of the low volume but management seems determined because of the low valuation by Mr Market. While I'm eager for a full restoration of the dividend, I am happy to admit that the course of action taken by the company is rewarding we longs richly. Since the buy back was announced on Feb 19th, the share price has risen from $10.10 to current level. Not too shabby. While it is unknown how a restoration would have impacted the share price, I'm more than happy with the results. Total gains is the object, no matter dividends or capital gains.

    Management has a solid plan for the future growth of the fleet and income streams. When the sale of the two vessels is completed, the company will have $175 million in cash to carry out it's plan to repurchase shares, increase the fleet size and restore and hopefully increase dividends down the road. All this from a company with a $230 market cap. Mr Market, take a look, we're better than that.
    Bullish
  • G
    George
    Next week management should be announcing the quarterly dividend. My expectation, ( hope), is that the dividend is reinstated to 35 cent quarterly. If not a full reinstatement, a raise to 20 cents quarterly would suffice. A twenty cent quarterly would only require $3.7 million, leaving an additional $3 plus million to fund the share buy back if needed. Since the company had $47.34 in total cash when last reported, there should be ample cash available to both increase the dividend and do the buy back. Speaking of the buy back, it will be interesting to find out how many shares we bought back during the Q1 conference call. I suspect, not many because it is really difficult to repurchase shares on a thinly traded company while trying to stay within the lines. I'm 100 per cent comfortable with our management. Super conservative for sure but that leads to a good nights sleep for we longs.
    Bullish
  • B
    Burn
    12per cent dividend, great coverage and solidified with long term contracts
  • j
    john
    JP. This is my view of the company. there are about 20 million shares outstanding. management expects about $97.5 million in distributable cash flow in 2022. the dividend could be raised to an annual $1 per share or about $20 million. A 1 million share buyback would use up another $20 million. There would still be $57 million left to either pay down debt faster or save for the down payment for the other new ships that will become available in the next 1-2 years. What is not to like about that scenario?
  • M
    Marck
    With interest rates heading up through 2022, how can the company not consider raising the dividend? How long can they expect investors to be satisfied with 2.5%?
  • m
    martin
    Stifel 9 June 2020 Highlight (after CPLP extended the charter terms on 2 vessels, from 2024 to 2026)

    Key Points
    • New contracts. CPLP was able to extend the charters by two years for the three vessels chartered to CMA CGM. The charter rates moved down ~$1,000/day, costing the company a bit more than $1 million a year in net income (~$0.06/unit), but as a result the charters were extended for two years, adding ~$20 million to the backlog. But more importantly, longer charters give more certainty to cash flows, which is still valuable for an MLP.
    • Akadimos. The Akadimos, previously the CMA CGM Amazon, comes off charter in June. The vessel will do a special survey but then will be chartered for 80 days starting early July. The three 9,000 TEU vessels chartered to CMA CGM are coming off multi-year charters in July, October, and February 2021. These large modern ships are the real question mark for cash flows going forward, although they are some of the best container ships in the world and should be able to garner good employment as things settle. Combined with the capesize vessel coming off charter in June, there are four vessels coming off charter in the near term, providing some uncertainty for unitholders.
    Recharters. We are assuming the vessels get rechartered, $30,000/day for the containerships. These are down from ~$40,000/day. At the reduced levels, we estimate the partnership should be able to cover the distribution at 1.5x. Although organic growth may be limited due to only building ~$5-10 million of cash a year. However, from an investor's perspective, unitholders will collect a 15% distribution plus the potential for a better valuation. While we believe the distribution is secure, a combination of inability to charter the three 9,000 TEU vessels or to a much lesser extent the capesize vessel could obviously have an impact on the long-term distribution coverage
  • H
    Hannu
    The reason for the drastic cut of the divvy seems to be that the board wants money to buy ships and grow the business, but due to the low stock value they do not wish to issue new stock, as that would lead to excessive dilution of current stock holders. Since the valuation of CPLP doesn´t seem likely to increase anytime soon, the board decided that the most prudent way to get capital for growth, would be to reduce the divvy and use the funds for organic growth. I would have preferred the higher divvy myself, but I can see how the board is thinking. In the long run they can grow the fleet, earn more and pay out more - without diluting the share holders. Probably a good move in the current market. With the retained divvy funds they can buy a couple of ships for sure, and hopefully lock them in for good rates when we have a Covid vaccine and the world economy reboots.
  • B
    Brad
    With the expected sale of one vessel in May, I would anticipate they use the funds to buyback shares, assume the stock price is below their estimated intrinsic value. Since the agreements are only MoU, I hope management has a press release once the transactions are final. Thoughts?
  • H
    Hannu
    Net Income per common unit from continuing operations $0.38, up 23%.
    $0.10 divvy.
    30 million stock repurchase program.
    Three 5,100 TEU Container Vessels.
    Pretty good news. Hope to see some uptick 2021.
  • M
    Michael B
    Why is this going down so much the past 2 days?
  • G
    George
    July 6th, Cape rates $33,760. This will be my final posting on Cape rates because we only own one and I dorealize that the containers is our main course. I started the thread because each $10,500 increase in cape rates represents one additional million dollars per quarter in earnings. If in fact, we are able to lease our cape fo $33,000 instead of the expected teens, it could add almost two million in earnings per quarter to what managment has been anticipating during the last conference call. Good news for the sustainability of the dividend.
  • G
    Geezer31
    I reread the conference call presentation. I think the major concern for CPLP is the potential bankruptcy of MSC Shipping. If they go bust then the coverage would be blown, the revenues from MSC may plunge, and the company would be stuck with unused capacity at a time when no one wants shipping. The secondary concern is rechartering the four ships that come off charter in 2020. They will likely be rechartered into the short term spot market, at rates much below expectations at the start of the year. But, I think CPLP will be able to maintain the 35 cents per Q dividend even if the four ships get rechartered at reduced rates, so in this situation we just have to wait for 1-2 years for global economic activity to recover, and while we wait collect the 35 cent dividend. So as long as MSC doesn't go bust, I think the dividend may be safe, which is really what matters to me. I'm not highly confident in this conclusion, it would be great if management could confirm whether they think the 35 cent dividend is safe in the event MSC stays solvent and charter rates for the four ships are weak.
  • m
    martin
    CEO of CMRE yesterday:

    "Mr. Gregory Zikos, Chief Financial Officer of Costamare Inc., commented:

    “On the market side, laid up capacity has started decreasing, indicating improving market conditions. Demand continues to favor the larger and medium sizes, and especially ships above 8,000 TEUs. Market activity has picked up and we have chartered in total 24 ships during the quarter.

    After months of inactivity the demolition market has re-opened and, as part of our fleet renewal program, we have sold for demolition two 7,400 TEU ships which we plan to replace with younger tonnage.”
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