Danaos shareholders stand to receive at least part of the cash bonanza currently showering over the company, the New York-listed company's executives said on Tuesday.
A few hours after announcing a record $669.6m net income for the first half of the year, Danaos founder and chief executive John Coustas signalled a dividend increase was in store, but not before next year.
“Definitely an increase in dividend will happen,” he told analysts in a conference call to investors.
He added, however, that such a move will be “seriously considered… from next year”.
Danaos, which stood on the verge of bankruptcy in 2018, had not paid dividends for 13 years before resuming them in the first quarter.
The company, which expects bullish boxship markets to continue at least until the end of next year, distributed $0.50 per share to shareholders in the first quarter and repeated the same payment in the second.
“We just started our dividend a quarter ago,” Coustas explained.
Stripping out one-off items, adjusted earnings per share more than doubled at Danaos in the first half of the year to $6.17 per share.
Young ships only
The owner of more than 70 containerships is not considering share buy-backs because they would reduce the liquidity of its stock, company executives said. The same goes for any kind of special dividend to shareholders in the form of shares Danaos holds in Zim — a US-listed Israeli liner company.
Danaos, which earned $76.4m by selling about one-fifth of its 8.9% Zim stake in June, said it plans to gradually wind down the remaining 8.2m shares it holds in the company.
The Zim stake is “clearly not an operating asset” and "the plan is that this will convert into cash, gradually”, chief financial officer Evangelos Chatzis said in the conference call.
Danaos may use part of its cash to further grow its fleet, with a preference for younger vessels that offer a clear profit upside.
Coustas had said in a previous conference call in May that Danaos would likely stay away from the secondhand market, given how overheated ship prices had become.
In July, however, he did not hesitate to spend $260m to acquire six ships of 5,466 teu each from Oaktree Capital Management.
As TradeWinds reported at the time and Danaos management reiterated on Tuesday, the vessels are currently employed at freight rates far below current market levels and the company expects to rake in considerably higher and longer rates when they are open for employment again next year.
This seems like a logical assumption to make, considering that Danaos is currently securing three to five-year long charters for its vessels. Some charterers are even fixing vessels for employment beginning in the middle of 2022.
If buying opportunities similar to the one with Oaktree arise, “we’re definitely there to look at them”, Coustas told analysts.
Danaos, however, would not pounce on older ships since those will likely fall foul of future environmental and energy efficiency standards, he argued. The Oaktree acquisition, by contrast, satisfies such concerns.
“If we were going today to the yards to build that size of vessel, we would get more or less the same specs,” he said.
