Danaos Corporation (DAC) is a leading container and dry bulk vessel service provider in Australia, Asia, and Europe. The company is headquartered in Piraeus, Greece, and provides seaborne transportation services by operating vessels in the containership and dry bulk sectors of the shipping industry.
Danaos has a substantial fleet of 72 container vessels ranging from 2,200 TEU to 13,100 TEU, 10 Capesize dry bulk vessels, and 15 container vessels under construction. Along with this, the company recently received delivery of its first three new building containerships, including one 7,165 TEU and two 8,010 TEU vessels.
The company's impressive dividend yield makes it an ideal choice for many investors seeking a solid stock with attractive dividend prospects. For the second quarter of 2024, DAC declared a dividend of $0.80 per share of common stock, which was paid on August 29, 2024, to stockholders of record as of August 20, 2024.
DAC pays an annual dividend of $3.20, which translates to a yield of 3.74% at the current share price. The company’s four-year average dividend yield is 2.98%. And its dividend payouts have increased at a CAGR of 47.4% over the past three years.
Also, with the ever-growing e-commerce operations, advancements in seaborne transportation, technological advancements, and worldwide demand, the container shipping market is poised at a 3.1% CAGR, resulting in a market volume of 134.03 billion by 2029.
Danaos' CEO, Dr. John Coustas, commented, "With respect to our activities in the dry bulk sector, we have recently taken delivery of all ten Capesize vessels. We have been gearing up our operations to ensure the integration within our fleet during this building phase before we continue to explore opportunities to further our reach in this sector."
He added, “Our revenues from the dry bulk sector have been steadily increasing, and we look forward to further diversifying our revenues and creating upside through the spot market exposure offered by the sector. Despite our recent fleet growth, renewal, and diversification activities, our balance sheet remains very strong, with a low net debt position.”
Shares of DAC have surged 19% over the past six months and 29.3% over the past year to close its last trading session at $85.66.
Let’s look at factors that could influence DAC’s performance in the upcoming months.
Robust Financials
During the second quarter that ended June 30, 2024, DAC’s operating revenues increased 2% from the prior year’s quarter to $246.31 million, and its income from operations for the quarter amounted to $139.98 million. Also, its adjusted net income and adjusted EPS came in at $132.31 million and $6.78 for the quarter, respectively.
Additionally, net cash provided by operating activities increased 0.8% from the year-ago value to $154.28 million. The company's cash, cash equivalents, and restricted cash stood at $372.45 million as of June 30, 2024, versus $271.81 million as of December 31, 2023.
Solid Historical Growth
DAC’s revenue and EBITDA have grown at respective CAGRs of 24.1% and 25.6% over the past three years. The company’s EBIT has increased 32.7% over the same timeframe, while its normalized net income has improved at a CAGR of 40.5%.
Also, the company’s tangible book value and total assets have grown at CAGRs of 24.1% and 8.1% over the past three years, respectively.
Favorable Analyst Estimates
Analysts expect DAC’s revenue for the fourth quarter (ending December 2024) to increase 8.8% year-over-year to $259.94 million. The consensus EPS estimate of $7.40 for the same period reflects a 5.9% year-over-year improvement. Also, the company has topped the consensus revenue estimates in three of the trailing four quarters.
Additionally, Street expects the company’s revenue for the fiscal year 2024 to increase 2.5% year-over-year to $986.93 million, and its EPS is expected to be $28.32 for the same year.
High Profitability
DAC’s trailing-12-month net income margin of 58.15% is 837.3% higher than the respective industry average of 6.20%. Its trailing-12-month gross profit margin of 74.67% is considerably higher than the industry average of 31.57%. The stock’s trailing-12-month EBIT margin of 55.77% is 456.9% higher than the 10.01% industry average.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 18.95%, 9.77%, and 14.20% are favorable, compared to the industry averages of 12.82%, 7.13%, and 4.94%.
POWR Ratings Reflect Promise
DAC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DAC has a B grade for Quality, in sync with its higher-than-industry profitability. The stock also received a B rating for Stability, justified by its 24-month beta of 0.40.
DAC is ranked #12 in the 37-stock A-rated Shipping industry.
Beyond what I have stated above, we have also given DAC grades for Sentiment, Value, Momentum, and Growth. Get access to all the DAC ratings here.
Bottom Line
DAC is a leading shipping sector company operating a strong fleet. Analysts appear bullish about the company’s growth prospects, driven by robust demand for its quality and diverse product offerings, fleet expansion, and strong market position.
Further, with its strong dividend payouts and robust financial performance, the company's stock appears a compelling buy.
How Does Danaos Corporation (DAC) Stack Up Against Its Peers?
While DAC has an overall POWR Rating of B, investors could also check out these other stocks within the A-rated Shipping industry with A (Strong Buy) or B (Buy) ratings: BW LPG Limited (BWLP), Overseas Shipholding Group, Inc. (OSG), and Global Ship Lease Inc. Cl A (GSL).
For exploring more A and B-rated shipping stocks, click here.
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DAC shares were unchanged in after-hours trading Friday. Year-to-date, DAC has gained 19.51%, versus a 21.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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