Deutsche Bank Upgrades Teekay Corp. (TK) to Buy on New Dividend Strategy

Deutsche Bank upgraded Teekay Corp. (NYSE: TK) from Hold to Buy with a price target of $90.00. Yesterday Teekay announced a bold new dividend strategy.

"Based on the cash flow growth expected to be generated by our combined GP and LP ownership interests following the dropdown of the Knarr FPSO to Teekay Offshore, we intend to increase Teekay's annualized cash dividend to between $2.20 and $2.30 per share effective for the first quarter of 2015, which represents an increase of approximately 75 and 80 percent above our current annualized dividend of $1.265 per share," commented Peter Evensen, Teekay's President and Chief Executive Officer. "In subsequent quarters, we intend to base our cash dividend on an initial target coverage ratio in the range of 1.15x to 1.20x. Over time, as we dropdown or sell the remaining Teekay Parent legacy operating assets, we expect to reduce our target coverage ratio."

Commenting on developments analyst Amit Mehrotra of Deutsche Bank said, "The revision reflects the company's bold new dividend strategy outlined after today's market close and ahead of its analyst day tomorrow. The new plan includes an 80% increase in its annual dividend effective 1Q15 (to $2.25 at the midpoint vs. $1.265 today), and a policy aimed at linking future div increases to cash flow growth at its two MLP subsidiaries. The result should be 20%/year grow in TK's dividend for the foreseeable future, which together with today's increase, easily justify a $90+ share price in the relatively near-term."

For an analyst ratings summary and ratings history on Teekay Corp. click here. For more ratings news on Teekay Corp. click here.

Shares of Teekay Corp. closed at $58.36 yesterday.

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