You learn the headline proper – a 28% yield.
That’s the present annual yield for CVR Companions (NYSE: UAN) primarily based on the distributions paid prior to now 4 quarters. As a result of the corporate is a partnership, it pays distributions as an alternative of dividends.
The latest distribution, paid in March, was $10.50 per share. Not unhealthy for a inventory within the low $90s.
The ammonia and urea ammonium nitrate producer has a variable distribution policy.
Administration has acknowledged that the components affecting the distribution embody “working efficiency, fluctuations within the costs obtained for completed merchandise, capital expenditures and money reserves deemed obligatory or acceptable by the Board of Administrators of [its] basic companion.”
The corporate’s cash available for distribution, the measure of money circulate that we use to investigate this partnership, has skyrocketed lately, aside from 2020.
Final yr, CVR generated practically $260 million in money accessible for distribution whereas paying out $130 million. Within the first quarter of 2023, money accessible for distribution was a formidable $111 million, so the yr is off to an incredible begin. With a low payout ratio, the distribution ought to be fairly massive.
However I wouldn’t get used to a 28% yield primarily based on the corporate’s monitor document. It omitted the distribution in 2020 and 2017 fully. And since the distribution is variable, it’s routinely lowered, generally drastically.
For instance, in March of final yr, CVR paid buyers $5.24 per share, slicing the payout practically in half the subsequent quarter to $2.26. In August, the distribution ballooned to $10.05, after which it plummeted to $1.77 in November.
In different phrases, you may’t depend on the distribution in any quarter. Should you personal the inventory, benefit from the large distributions after they are available in however don’t count on them to proceed.
There will certainly be reductions within the close to future.
Dividend Security Score: F
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