Carnival was a good dividend play before the crisis. It's yield as of today was: 15.74%. Something to chase? The overall premise is to buy just about any quality stock right now and gain some fairly hefty profits in the next 6-18 months. Do we think the cruise liner can still give back $2/share to the consumer at a $9 price-tag?
They just borrowed $3B for the next six-months and are cancelling cruises impacting port and port town economies. Quarterly results are sure to suffer and price-targets most likely to fall... Can they maintain this level of dividend and does it matter in the short term, if things fully recover in 18 months? If so, then the stock should be back above $40 and life is good catching a 15% dividend down here plus cap appreciation.
Carnival has warned of "material negative impact." You think? they've stopped cruising and they have to disinfect everything and the US is just starting to realize this is real and the impact is growing. They've drawn on their credit facility for the $6B to maintain liquidity.
So the premise is, the virus isn't as bad for the general and healthy population, it is straining economics, social and health infrastructures but it will pass, a vaccine will be found and a few months later everyone will forget... just like every other disaster. Is the cruise industry all of a sudden dead? No. At an 83% discount and a dividend we'll never see again in our lifetime this is not a bad play to make.
However, you must have patience... Carnival said: The spread of the coronavirus has made it impossible to project earnings, the company said, but it expects to have a loss in the year ending Nov. 30.
Norwegian(NCLH) is another but no dividend.
Happy Trading!
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