Dueling Fools: Cedar Fair Bull Rebuttal

• Email
• Share
• Print

My dueling opponent Rick Munarriz and I apparently have different definitions of "last year." Cedar Fair's (NYSE: FUN) most recent quarterly report indicated trailing-12-month EBITDA of $335.6 million, roughly 8% higher than the $310 million figure Rick mentioned. He was apparently looking at the last full fiscal year's numbers, rather than the more recent -- and clearly stronger -- trailing-12-month ones.

If turning over six months can show that kind of improvement, that soon after a large acquisition, then things are definitely looking up for the amusement-park giant. And that kind of improvement has come during a year that Rick wants us to believe was tough on local entertainment companies. If Cedar Fair showed such impressive strength during a rough economic period, how well will it do when things get better?

Money really talks
Then there's the matter of Cedar Fair's hefty distributions. Truth be told, they're not that far out of line with those of other limited partnerships:

Company	Current Yield
Enbridge Energy Partners (NYSE: EEP)	6.9%
TC Pipelines (Nasdaq: TCLP)	6.9%
Atlas Pipeline Partners (NYSE: APL)	6.8%
Cedar Fair	6.8%
Kinder Morgan Energy Partners (NYSE: KMP)	6.6%
TEPPCO Partners (NYSE: TPP)	6.6%
Buckeye Partners (NYSE: BPL)	6.4%

Because of the way partnerships work, investors are taxed on their share of the partnership's profits, regardless of how much they receive in distributions. As a result, they have to shell out high distributions to attract investors. In fact, partnerships often set their distributions at far greater levels than GAAP earnings. As long as Cedar Fair's distributions remain well-covered by its operating cash flow, they should remain intact.

With fundamentals improving, and a plump, still-covered distribution providing ample payment while you wait for a recovery, what's not to like?

Think you're done with the Duel? Think again! Go back and read the other entries, sound off on Motley Fool CAPS, then vote for the winner.

At the time of publication, Fool contributor Chuck Saletta owned shares of Kinder Morgan Management, a related company to Kinder Morgan Energy Partners. Cedar Fair is an Income Investor pick. The Fool's disclosure policy is a little uneasy around costumed mascots.