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Danaos Corporation (NYSE: DAC) is a name that value investors stumble on, double-check the numbers, and ask: “What’s the catch?”

On the surface, the story looks compelling. At a share price of $105.55, DAC trades at about 3.9x earnings, roughly 2.7x EV/EBITDA, and about half of book value, while sitting on a very lightly levered balance sheet. According to the 20-F (2025), p. 70, Danaos has billions of dollars of contracted charter revenue, and as of year-end 2025 it had 100% operating-day coverage for 2026, plus substantial coverage into 2027–2028.

On top of that, the company is returning capital. Management is paying a $0.90 per share quarterly dividend and still has $65 million left on a $300 million buyback program, as highlighted in the Q4/FY25 press release (2026-02-09). Liquidity at December 31, 2025 stood at $1.405 billion, with net debt at only about 0.20x LTM adjusted EBITDA.

So why does the market price this like a melting ice cube?

Because the real battle for DAC’s equity value happens in 2027–2028, when many of those lucrative containership charters roll off into a market that’s facing a huge wave of new vessel deliveries. In our view, Danaos is not a simple “bond proxy with ships attached”; it’s an asset- and cycle-sensitive story where capital returns are excellent today but depend heavily on how management navigates the next re-charter window and a big newbuild program.

Want to go beyond headlines and dividend yield? Use DeepValue to pull Danaos’ filings, backlog details, and covenant terms into a single, citation-backed report in minutes instead of hours.

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In this article, we’ll walk through our full, investor-focused take on Danaos: what the business actually does, where the cash flows come from, why the stock looks cheap, and what specifically could go right or wrong through 2028.

What Does Danaos Actually Do?

Danaos is primarily a containership owner. The company buys or orders vessels, then leases them out to global liner companies—names like CMA CGM, MSC, Maersk, and others—under multi-year, fixed-rate time charters. That creates relatively predictable revenue streams as long as the ships are on hire and the counterparty is performing.

According to the 20-F (2025), p. 4, as of February 28, 2025 Danaos had:

74 owned containerships in the water
15 containerships under construction
10 Capesize drybulk vessels, mostly employed in the spot/short-term market

The containership fleet is the core earnings engine. The drybulk ships, run mostly in spot and short-term charters, are a smaller but more volatile contributor. Management explicitly frames overall earnings as concentrated in contracted container cash flows, with drybulk as a cyclical overlay.

How the revenue model works

Under time charters, liners pay Danaos a daily rate to use the vessel. Importantly:

Hire usually stops when the ship is off-hire (e.g., for drydock or major repairs)
Charterers can have termination rights if off-hire exceeds agreed thresholds

So uptime, technical reliability, and smart drydock scheduling are direct revenue drivers. The company tracks performance using time charter equivalent (TCE), which is operating revenue minus voyage expenses (excluding commissions), as defined in the 20-F (2025), p. 76.

Most operating costs (crewing, maintenance, insurance) are fairly fixed per vessel. The real swing factor is the rate achieved when charters roll over, plus spot exposure in the Capesize segment. As the 20-F (2025), p. 56–57 makes clear, when expiring charters have higher rates than the current market, re-charters will likely reset down.

That simple mechanism—re-charter slope against a known backlog—is the heart of the DAC equity debate.

How Strong Is Danaos’ Contracted Backlog?

The bull case begins with real visibility.

Danaos reports substantial contracted revenue and high charter coverage:

$3.3 billion of contracted cash revenues from existing charters as disclosed in the 20-F (2025), p. 70
$896 million scheduled for 2025, $759 million for 2026, and $1.7 billion in 2026 and thereafter
100% operating-day coverage for 2026, then 87% for 2027 and 64% for 2028, per the Q4/FY25 press release (2026-02-09)

In other words, between now and the end of 2026, management doesn’t need to do anything heroic in the charter market to keep revenue flowing. The contracts are already in place.

This is why Danaos shows up in many screens and writeups as a “cash-yield + visibility” story. As Investing.com’s Feb 2026 coverage emphasizes, investors latch onto backlog, duration, and low leverage as the key protections.

But coverage sharply tapers after 2026:

2027: 87% covered
2028: 64% covered

That’s the window where the market is already worried about a step-down in EBITDA.

Is DAC Stock a Buy in 2026?

From our perspective, the answer depends on your time horizon and how you think about risk.

Our base case assigns a 50% probability to DAC being worth around $125 per share. In this scenario:

The 2026 charter coverage and backlog allow Danaos to keep EBITDA relatively stable through 2026
Dividends and buybacks continue
Leverage rises modestly as newbuild capex ramps, but without breaching lender comfort

The bear case (25% probability, around $80 implied value) is driven by a double squeeze:

Containership values fall, tightening collateral coverage under the company’s credit facilities
Re-charter rates for 2027–2028 reset materially lower, pressuring EBITDA and possibly triggering restrictions on dividends or buybacks

The bull case (25% probability, about $155 implied value) assumes that the time-charter market absorbs the delivery wave reasonably well. In that world:

Re-charters in 2027–2028 get fixed at rates that keep EBITDA near today’s run rate
Coverage into those years increases without locking in a big earnings step-down

At $105.55, the market is clearly not pricing in that bull scenario; it’s embedding fear that the reset will hurt. We view DAC as a potential buy for investors who:

Are comfortable with shipping-cycle risk
Understand that capital returns can be lender-constrained
Actively monitor charter coverage, vessel values, and leverage over the next 6–18 months

From a pure valuation standpoint, DAC screens cheap: the FMP snapshot shows P/E around 3.9x, EV/EBITDA about 2.7x, and price-to-book near 0.5x. Net debt to EBITDA is about 0.16–0.20x, with interest coverage over 10x, according to the FMP dataset and 20-F (2025), p. 79. Those are not distressed numbers.

But we do not treat this like a bond substitute. We treat it like a cyclical asset play where contracted cash flow buys time, not immunity.

If you’re weighing base, bull, and bear cases, use DeepValue to scan Danaos’ SEC filings, IR deck, and industry sources in parallel and get a full, citation-backed report you can trust.

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How Strong Is Danaos’ Balance Sheet and Margin of Safety?

The single biggest comfort in this story is the starting balance sheet.

As of December 31, 2025, management reported:

$1.405 billion of total liquidity (cash, undrawn revolver, marketable securities)
Net debt of roughly $140.5 million
Net debt/LTM adjusted EBITDA of 0.20x

Those figures come from the Q4/FY25 press release (2026-02-09). On top of that, Danaos has issued a $500 million senior unsecured bond due 2032 at 6.875% and used part of the proceeds to retire secured facilities, according to the February 2026 IR deck. That mix reduces near-term secured-collateral pressure and extends duration.

Free cash flow has also been strong. The FMP series notes a free cash flow print of about $260 million for 2025-12-31, supporting both capital returns and reinvestment.

So where are the cracks?

Collateral coverage and covenants matter

Danaos’ credit facilities come with collateral coverage requirements—generally in the 120–125% range—and minimum liquidity requirements (at least $30 million), as spelled out in the 20-F (2025), p. 79. If vessel market values fall, or if charter coverage deteriorates, those tests can tighten.

Crucially, these same facilities restrict dividends if covenants are breached or if collateral coverage would not be satisfied post-distribution. In other words, capital returns are structurally conditional on lender comfort. The company itself underscores that some vessels have already triggered impairment indicators due to charter and vessel value volatility, even though no actual impairments were booked yet, per the 20-F (2025), p. 85.

When we talk about “margin of safety” here, we’re not saying “backlog equals guaranteed equity floor.” We’re saying:

Low leverage + high liquidity + near-term contracted coverage = time and optionality
That protection erodes if both vessel values and re-charter economics move against Danaos while leverage rises to fund newbuilds

This is why we size DAC as a cyclical asset-value and rate-reset position, not a core income anchor.

What About Customer Concentration and Counterparty Risk?

Another key dimension for DAC is who actually pays the bills.

According to the Danaos 2024 Annual Report (20-F/A 2025), p. 57, roughly 62% of 2024 operating revenues came from just six customers. The top two:

CMA CGM: 20% of revenues
MSC: 13% of revenues

As of February 28, 2025, Danaos had 16 vessels chartered to CMA CGM and 10 to MSC. That concentration is not unusual in the containership lessor space, but it does mean that counterparty performance and renewal behavior at a handful of liners have an outsized impact on cash flows.

The 20-F (2025), p. 57 is clear: contracted minimum payments are subject to performance by the counterparties, and any failure to pay or material renegotiation would materially hurt results. That’s the flip side of being “infrastructure-like”: less volatility day-to-day, but higher exposure to a few big partners.

In our base and bull cases, we assume major counterparties keep performing and that renewals are driven more by market rates than acute credit events. But we always keep this on the radar as a thesis breaker.

Will Danaos Deliver Long-Term Growth Beyond 2026?

The obvious near-term story is “backlog + dividends,” but the equity value will increasingly depend on what happens in:

The 2027–2028 re-charter window
The newbuild program
Emerging adjacency plays like LNG

1. The 2027–2028 charter reset

Coverage for 2026 is locked in. The real test is how management fills the gap in 2027–2028.

At Q4 2025, Danaos disclosed:

87% operating-day coverage for 2027
64% operating-day coverage for 2028

as per the Q4/FY25 press release (2026-02-09). That already reflects some fixing activity but still leaves a substantial portion open.

On the earnings call, management and analysts highlighted “lower contracted charter rates” as a factor in the revenue bridge, according to the Motley Fool Q4 2025 transcript (2026-02-10). That’s the first sign that the roll-off of very high COVID-era rates is slowly bleeding into the P&L.

Over the next few quarters, investors should watch:

How fast 2027 and 2028 coverage climbs
Whether IR and call commentary emphasize coverage gains without improving run-rate EBITDA guidance
Any language that suggests defensive fixing at lower rates, rather than opportunistic locking in

If we see coverage filling while EBITDA expectations sag, that’s a classic sign the step-down is being locked in.

2. The newbuild capex ramp

Danaos is in the middle of a major newbuild program. The company discloses remaining commitments of roughly $1.26 billion for 16 vessel construction contracts scheduled for 2025–2028, per the 20-F (2025), p. F-23.

To finance this, Danaos entered into an up-to-$850 million syndicated credit facility in February 2025, intended to fund 14 contracted newbuild containerships delivering between 2026 and 2028, as noted in the 20-F (2025), p. 70 and IR deck, February 2026.

The good news:

21 of 27 newbuildings are already backed by multi-year charters, which significantly reduces earnings “air pockets” on delivery, per the same IR deck.

The risk:

As the company draws on the $850 million facility, leverage will climb just as the market is digesting a large global containership orderbook—around 35.4% of existing capacity through 2028, according to the February 2026 IR deck.
If re-charter rates are weak and vessel values fall, those new secured borrowings could tighten collateral coverage headroom and put pressure on dividends and buybacks.

Our 6–18 month monitoring plan explicitly focuses on this: if coverage does not materially extend into 2028 while facility drawdowns accelerate, we would treat that as negative convexity—more leverage into a weaker forward pricing curve—and reduce exposure.

3. Alaska LNG and energy adjacency

Danaos is also positioning itself as a “preferred tonnage provider” for at least six LNG carriers tied to the Alaska LNG project. The company has already invested $50 million of development capital, as described in the Q4/FY25 press release (2026-02-09) and Oil & Gas Journal article (2026-01-21).

On the Q4 2025 call, management framed the project timeline around 2030, with vessel-order decisions likely “in about a couple of years’ time,” as noted in the Motley Fool transcript (2026-02-10). That lines up roughly with the 2027–2028 window.

We see LNG as optional upside if:

The project achieves final investment decision
Danaos can secure long-term, creditworthy charters that justify the capex

But it becomes a thesis risk if the company commits to large LNG newbuilds before having clearer visibility on 2027–2028 containership earnings and leverage. In that case, investors would be taking on multi-year, greenfield project risk on top of a already complex shipping cycle.

Key Risks: What Could Break the Thesis?

We boil the main downside drivers into three categories.

1. A structurally weaker 2027–2028 earnings base

If by late 2026 the company has:

Significantly increased 2027–2028 coverage, and
Management keeps highlighting “lower contracted charter rates” as a primary driver of revenue bridges

then it likely means the new contracts are locking in a lower run-rate EBITDA. That’s not necessarily fatal, but it caps upside and makes capital returns far more sensitive to leverage and vessel values.

We would treat that combination as a reason to downshift conviction or reduce exposure.

2. Collateral coverage stress and dividend restrictions

Danaos’ credit facilities contain explicit language that:

Require collateral coverage at 120–125% of outstanding loan amounts
Impose minimum liquidity
Restrict dividend payments in case of covenant breaches or insufficient collateral coverage

All of this is documented in the 20-F (2025), p. 79. If the company discloses any restriction or suspension of dividends or buybacks that is clearly tied to collateral coverage tests, that is a clear sign the balance sheet has shifted from a support to a constraint.

We would treat any such announcement as a strong sell or at least a major de-risking signal, because a large part of the equity thesis is about harvesting cash yield while the backlog rolls.

3. Counterparty shocks or Alaska LNG overreach

Two more risk vectors to keep on the radar:

A major liner counterparty (e.g., CMA CGM, MSC) failing to perform on payments or pushing for material renegotiation. As noted in the Danaos 2024 Annual Report (20-F/A 2025), such an event would directly threaten the contracted-visibility premise.
Alaska LNG commitments escalating beyond the initial $50 million development investment, especially if new LNG carrier orders occur before the 2027–2028 containership outlook is better de-risked. That would represent thesis drift into a complex, long-dated project.

We don’t see either risk as imminent today, but both are worth periodic checks as part of a 6–12 month monitoring framework.

How We’d Monitor DAC Over the Next 6–18 Months

For a name like Danaos, the difference between a great outcome and a value trap is often in the details. Our roadmap:

Over the next 90 days (through roughly May 2026):

Watch the next charter coverage and backlog update
Pay special attention to:
2027/2028 coverage changes
Any explicit mention of “lower contracted charter rates” in press releases or transcripts

If coverage remains around 87%/64% with little progress, we treat the stock as having rising exposure to a challenging orderbook window. If coverage improves but is clearly anchored by lower rates, we cut conviction. If coverage improves while dividends and buybacks continue and leverage remains contained, we’re more comfortable adding selectively.

Over the next 180 days (through roughly August 2026):

Track drawdowns on the up-to-$850 million newbuild facility
Check whether new draws are matched by new multi-year charters into 2028
Keep an eye on any language about collateral coverage or covenant headroom

Meaningful facility drawdowns without a corresponding extension in coverage (at reasonable rates) is a red flag. So is any hint that dividend capacity is being squeezed by lender tests.

In our own work, we’d automate much of this tracking—monitoring filings, press releases, and industry commentary—using tools like DeepValue so we can spend our time on judgment rather than document hunting. If you want to scale this kind of pattern recognition across multiple shipping and infrastructure names, Read our AI-powered value investing guide for a deeper look at how to integrate AI into your research process.

Bottom Line: How We’d Position Danaos Today

Putting it all together:

Valuation: DAC is cheap on almost any traditional metric (P/E, EV/EBITDA, P/B).
Balance sheet: Starting point is very strong, with low net leverage and ample liquidity going into a capex-heavy period.
Cash returns: Dividend yield and ongoing buybacks are attractive, but not guaranteed; lender covenants are an explicit gating factor.
Core risk: The 2027–2028 charter reset and the global containership orderbook could drive a meaningful EBITDA step-down exactly as leverage ramps.
Optionality: LNG exposure and continued disciplined capital allocation could add upside if executed conservatively.

At $105.55, we see Danaos as a potential buy with a 6–12 month re-assessment window, particularly for investors comfortable underwriting shipping cyclicality and covenant complexity. Our bias is to start with a moderate position size, harvest the yield while it lasts, and stay highly responsive to new information on coverage, vessel values, and leverage.

If you’re going to own a name like DAC, you need to be willing to do the work—tracking 20-F and 6-K disclosures, IR decks, and earnings transcripts quarter after quarter. That’s the only way to distinguish between a normal cyclical reset and a true balance-sheet problem.

Instead of manually combing through 20-Fs, bond prospectuses, and shipping decks, let DeepValue scan and synthesize Danaos’ full document set so you can focus on sizing and timing decisions.

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Danaos Corporation (DAC) Deep Research Report: Deep Value, Dividends, And A Risky 2027–2028 Reset