CMRE - Costamare PFD E: No Obvious Credit Angle No Obvious Duration Angle

2024-03-18 00:58:04 ET

Summary

• The Series E preferreds are the most junior of the preferreds, although it barely matters since the preferred stack in all is very small compared to debt.
• Implied credit ratings on the preferreds based on spreads don't leave a credit angle upside.
• It's difficult to posit that long-term rates should be lower than where they already are on the yield curve.
• We think that optionality in trade and trade disruption like the issues in the Red Sea should have people much more focused on the common stock than the preferreds.

Costamare Series E Preferreds ( CMRE.PR.E ) are the most junior of the preferreds in the whole capital stack, above only common stock. Value drivers here are credit quality of Costamare ( CMRE ) and duration considerations, as they are basically ultra-long duration unsecured credit. We've discussed them in the past, and the core idea that the common stocks are more worth following has not changed, especially as trade disruption events could become recurring trading opportunities where the common stock articulates much better....

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