Danaos After the $90 Payout: Cheap, Growing Backlog, or a Cash-Dragged Sailor?

Hook and thesis

Danaos (DAC) is a rare mix: real earnings power, a visible contracted backlog and what looks like bargain-bin multiples, but also a headline-grabbing $90 per-share dividend and a new investment into the Alaska LNG project that will tie up liquidity. The question for active traders is whether that cash distribution and strategic pivot are short-term noise or a genuine shift that creates an opportunity to buy the underlying shipping franchise at a deep discount.

My view: buy selectively and with a protective stop. Danaos' operational fundamentals - adjusted EPS of $7.14 in Q4 2025, adjusted net income of $131.2M and a $4.3B contracted backlog with 100% revenue coverage for 2026 - argue for a valuation materially above todays market price. But the $90 special dividend and LNG commitment are reasons to size positions and keep a clear exit. The trade below targets a re-rating over the next 180 trading days while protecting capital if the market punishes the payout more harshly than fundamentals warrant.

Why the market should care

Danaos operates in container and drybulk shipping, with a business model skewed toward multi-year fixed-rate charters. That model gives visible near-term cash flow: management expanded the contracted revenue backlog to $4.3 billion and reports 100% contract coverage for 2026 and 87% for 2027. Those are not trivial numbers; they imply a multi-year revenue stream insulated from spot volatility during the coverage window.

The company reported adjusted EPS of $7.14 for Q4 2025 and adjusted net income of $131.2 million. Liquidity is also sizeable on paper: the company declared a $90 per-share dividend and still cited roughly $1.4 billion of liquidity going into 2026. Market capitalization is roughly $1.97 billion. All told, headline multiples look low - the trailing P/E is ~4.0 and P/B sits around 0.53 - which tells you the market is either not giving credit for recurring charter cash flow, factoring in a material balance-sheet change from the special dividend, or both.

Data-backed supporting points

• Q4 2025 adjusted EPS: $7.14; adjusted net income: $131.2M.
• Contracted revenue backlog: $4.3B; 100% coverage for 2026, 87% for 2027.
• Declared special dividend: $90 per share; ex-dividend date: 02/23/2026; payable date: 03/04/2026.
• Liquidity cited: $1.4B (management commentary accompanying the Q4 release).
• Market cap: $1.965B; shares outstanding: 18,309,700; float: ~8.51M.
• Valuation: trailing P/E ~4.04; P/B ~0.53; 52-week range $65.40 - $108.87 (high set 02/17/2026).

Valuation framing

At a market cap of about $1.97B and a trailing EPS that implies a P/E of roughly 4.0, Danaos trades at a deep discount to most diversified shipping peers and certainly to other asset-heavy transport companies. A P/B of 0.53 further signals either the market expects asset impairment, a severe balance-sheet change, or that investors are wary of managements capital-allocation choices.

The $90 per-share special dividend partially explains the multiple compression. That distribution - enormous relative to the current share price - will materially alter the companys cash position unless financed or otherwise planned for on the balance sheet. If the market concludes the payout impairs growth or forces asset sales, the multiple compression is justified. If, alternatively, the dividend is a one-off that cleans up the balance sheet while leaving a profitable core intact, the market could re-rate toward a more conventional shipping multiple over the next several months.

Catalysts

• Ex-dividend date 02/23/2026 and payable date 03/04/2026 - immediate near-term liquidity and price action catalyst.
• Q1 operational updates on fleet utilization and charter renewals - these will confirm whether backlog coverage converts to cash flow as expected.
• Market reaction to the Alaska LNG investment - any clarity or partnership announcements could re-price optionality into the shares.
• Strategic capital-allocation commentary from management - clarity on funding the $90 payout or plans to replace liquidity will be important.

Trade plan (actionable)

Trade direction: Long
Entry: $107.34
Target: $155.00
Stop loss: $95.00
Horizon: long term (180 trading days) - this horizon gives the market time to digest the special dividend, see how liquidity changes post-payout, and re-evaluate the stock against its contracted backlog and earnings power.

Rationale: entering at the current market price of $107.34 captures the companys visible 2026 revenue coverage and the declared cash return while giving a reasonable stop beneath the 50-day EMA and the recent consolidation zone. The $155 target assumes a partial multiple expansion toward mid-teens EV/EBITDA equivalents for a company with secured charters and strong near-term cash conversion, plus modest upside for positive LNG optionality or quieter-than-feared balance-sheet impact from the special dividend.

Exit discipline: if share price breaches $95.00, cut the position to limit downside. If the company issues incremental equity or materially changes fleet financing, re-evaluate immediately - that could either invalidate the thesis or increase upside through recapitalization clarity.

Technical backdrop

The 10/20/50-day moving averages (10-day SMA ~$104.08, 20-day SMA ~$103.05, 50-day SMA ~$98.95) show a short-term uptrend and the 9-day EMA (~$105.15) is above the 21-day EMA, supported by a bullish MACD and an RSI of ~66.9. Momentum favors the bulls, but the crossing of a very large dividend event means technicals may decouple from fundamentals in the short window around the ex-dividend date.

Risks and counterarguments

• Liquidity shock from the $90 payout: a special dividend of that size will materially reduce cash on the balance sheet and could force asset sales, increased leverage, or equity issuance. Any of those outcomes could be negative for the share price.
• Mispricing of dividend vs. ex-div adjustment: markets typically price in the dividend; if the stock opens down by close to the $90 amount on the ex-dividend date, any pre-ex-div buy would be neutral-to-negative after the payout and transaction costs.
• Alaska LNG investment execution risk: LNG projects are capital-intensive and long-dated; the announced investment could sit on the balance sheet for years before producing cash flow, tying up capital that might otherwise be used for the fleet or deleveraging.
• Macro shipping cycle reversal: container rates and demand can be cyclical. While Danaos has multi-year charters covering 2026 and much of 2027, prolonged weakness in global trade volumes could weigh on renewals and medium-term revenue.
• Concentration / float dynamics: the float is relatively small (~8.5M shares) versus share count, which can magnify moves and create larger-than-expected volatility, especially around corporate actions like this dividend.

Counterargument: One could argue the company is doing the responsible thing by returning cash to shareholders now while making a modest strategic play into LNG optionality. If management follows the special dividend with clear funding steps or if they use the payout to reset expectations and repurchase stock after stabilization, the market may treat the move as shareholder-friendly and re-rate the shares higher. That argument supports buying the dip post-ex-div.

Conclusion - clear stance and what would change my mind

Stance: Constructive-but-cautious long. Danaos' core shipping business shows strong near-term cash visibility and cheap headline multiples that justify a long position sized to reflect balance-sheet uncertainty. The trade advocated above seeks to capture a normalization of multiples and benefits from backlog conversion, while the stop protects downside if the market punishes the special dividend and LNG exposure more than anticipated.

What would change my mind quickly: if management provides concrete financing detail that implies persistent leverage increases (asset sales, high-cost financing, or a dilutive equity raise) that materially reduce future earnings power, I would move to neutral or short. Conversely, if management announces a financing package, partnership, or other move that funds the $90 payout without impairing the fleet or future chartering capability, Id move to add to the position and raise the target.

Final note for traders

This is an active, event-driven trade that mixes a one-off corporate action and an operational shipping story. Size positions with care, use the stop, and monitor developments around the ex-dividend date and any liquidity statements from management. The long-term case rests on backlog and recurring charter cash flow; the near-term volatility will be driven by how the market digests that huge special payout and the companys Alaska LNG optionality.