Jefferies expects Star Bulk Carriers to keep raising its quarterly dividend throughout the year, given the strong fundamentals in the dry bulk sector.
The US investment bank foresees the Greek bulker owner raising the payout to $0.76 per share for the second quarter from $0.30 per share in the first three months.
It also expects Star Bulk to hand over $1.27 per share for the third quarter and $1.97 per share for the final quarter.
"We expect total 2022 dividend payments of $4.30 per share, equating to a 19% current yield," analyst Randy Giveans wrote on Wednesday in a client note.
"Management indicated that it would prioritize the dividend while also slowly reducing its leverage."
Jefferies also raised its price target for Star Bulk's shares from $25 to $28 and reiterated a buy rating.
"We remain convinced of an ongoing dry bulk shipping market recovery on an improving global economy, increased demand for seaborne dry bulk commodities and the best supply-side fundamentals seen in decades," Giveans wrote.
He based his thesis on Star Bulk keeping at least $211m in cash for the second quarter, $243m for the third quarter and $269m for the fourth quarter while holding a fleet of 128 ships.
Giveans acknowledged volatility that saw the Baltic Dry Index hit 3,254 points in May and then fall to 2,669 points in June.
He also noted that the capesize 5TC, a spot-rate average across five routes, reached $45,000 per day in May before falling to $20,000 per day last week and then recovering to $33,258 per day on Wednesday.
An improving economy
"That said, management expects dry bulk rates to remain firm this year as the global economy improves and steel production by China and others remains elevated in 2021," he wrote.
"The capesize forward curve for the third quarter of 2021 is now above $40,000 per day as commodity prices remain high, Vale ramps iron ore exports, India and China restock coal inventories and fleet growth slows."
He also said a low orderbook and Star Bulk's $230m scrubber investment, which is making $100m per year off a wide fuel spread, are also benefiting the company's future.
