By Kris Rosemann
We weren’t surprised by Costamare’s (CMRE) ~66% cut in its dividend, and readers should have been on the same page. Prior to the cut, the firm registered a -1.5 Dividend Cushion ratio, well below the cutoff for consideration as a safe payout. We have long been concerned with the safety of the dividend, as the above chart depicts. Not only was the quantitative portion of our research spot on with respect to the risk in Costamare’s dividend, but the qualitative side of our research adequately reiterated our concerns. The headline of Costamare’s dividend report: Costamare should not be paying a dividend, in our opinion.
Costamare is but one of many dividend cuts the Dividend Cushion ratio has forewarned investors of in recent months. If you’re not using the Dividend Cushion ratio in your dividend growth framework, you’re not taking advantage of the many resources of our dividend growth product. Let’s recap recent dividend cuts in our coverage universe that the Dividend Cushion ratio highlighted as being in severe risk (any ratio below 1, and especially below 0, implies heightened risk to the sustainability of the dividend payout):
We continue to hold dear our belief in forward-looking, cash-flow based dividend analysis, and the above table speaks to the notion that the Dividend Cushion ratio is one of the most uniquely-effective tools available to investors. If you have not done so already, please take the time to read further into the Dividend Cushion in order to better understand how it serves investors, “Update: Digging Into the Valuentum Dividend Cushion.”