Star Bulk Carriers is IBD Stock Of The Day as it breaks out amid hopes for an acquisition-fueled earnings comeback. High dividend stock Star Bulk Carriers broke out past a buy point.
The Athens, Greece-based shipping company on April 9 announced the completion of its all-stock merger with Eagle Bulk Shipping. It expects the merger to create "a global leader in dry bulk shipping," driving scale and growth.
Star Bulk is likely to report earnings for the first quarter later in May. During its last earnings report on Feb. 12, management gave a positive outlook for the dry bulk market.
Also in February, Star Bulk joined other carriers saying their ships will avoid the Suez Canal and Red Sea transits due to attacks by the Houthis, a Yemeni armed group.
High Dividend Stock Star Bulk Hits A High
On the stock market today, shares of Star Bulk Carrier surged 5.9% to 26.47 in big volume, hitting a 52-week high intraday. Star Bulk Carrier stock cleared a 25.16 buy point from a flat base.
The relative strength line also hit a high as the dividend stock broke out. That positive signal is marked by a blue dot at the end of the RS line on the daily and weekly MarketSurge charts.
Star Bulk stock's breakout on Tuesday follows support at the 50-day moving average in April. The pullback that month possibly reflected investor nervousness about Iran-backed Houthi missile and drone attacks, amid the Middle East war.
The high dividend stock offers a quarterly cash dividend of 45 cents per share, yielding 5.5%. The dividend payout ratio is a relatively high 81%, which is offset by expectations for better earnings.
Many investors like the shipping sector because these companies distribute a chunk of their earnings.
Star Bulk Carriers: Earnings Turnaround
When Star Bulk next reports for the first quarter, analysts on Wall Street forecast a 70% earnings rebound on a 40% revenue bounce.
In 2023, Star Bulk generated earnings of $1.84 per share, down from $5.94 in 2022 and $6.82 on 2021. The earnings decline reflected weaker market conditions and higher operating expenses due to inflationary pressures, the company said.
On top of that, the company is investing in renewing its fleet, including vessel sales and newbuilds. It currently operates a fleet of 163 bulk carriers.
For full-year 2024, analysts on Wall Street expect Star Bulk earnings to more than double to $4.18 per share, according to FactSet. They anticipate a further 10% gain in 2025.
In February, Star Bulk management said the outlook for the dry bulk market "remains positive." They cited "favorable supply dynamics, geopolitically driven inefficiencies in trade, and a recovery of demand."
They tied recovering demand to infrastructure investment as the world transitions to cleaner energy.
"Star Bulk expects to take advantage of the recent strength in the dry bulk market having mostly maintained its diverse scrubber fitted fleet in the spot market," the company said in a Feb. 12 earnings release.
Dry bulk vessels transport commodities such as iron ore, minerals, steel products, fertilizers and grain.
Despite Tuesday's 52-week high, Star Bulk stock remains well below the five-year high of 33.99, set in May 2022. The high dividend stock is far below the 10-year high of 78.10, set in September 2014.
However, it has been a strong performer in the past year. That is reflected in an RS Rating of 86 out of 99, meaning Star Bulk has outperformed 86% of all stocks in IBD's database over the past 12 months.
