Just a few weeks after I called it a compelling dividend stock, Six Flags (SIX -1.15%) is making a (lower-case) fool of me. Shares are down over 12% to kick off 2020 after the company issued warnings regarding its upcoming fourth quarter 2019 report. Specifically, its development partner in China is not faring so well, and business here in the U.S. is expected to decline from fourth-quarter numbers a year ago.

More details will be forthcoming, but suddenly Six Flags' dividend doesn't look as solid as it was before.

People sitting in a roller coaster car at a Six Flags theme park.

Image source: Six Flags.

2019 ends with all fizzle and no sizzle

The first of the problems has to do with Six Flags' parks in development in the world's most populous country. The theme park operator has been working with Chinese developer Riverside Investment Group for the last few years and was slated to open a couple new roller coaster attractions in 2020. It would seem that is now unlikely. To quote Six Flags in its disclosure to the SEC:  

The development of the Six Flags-branded parks in China has encountered continued challenges and has not progressed as Six Flags Entertainment Corporation (the "Company") had expected. The Company's partner in China, Riverside Investment Group ("Riverside"), continues to face severe challenges due to the macroeconomic environment and the declining real estate market in China. This has led Riverside to default on its payment obligations to the Company and, as such, the Company has delivered formal notices of default under its agreements.  

In other words, Riverside can't pay what is owed to Six Flags. The trade war between the U.S. and China hasn't helped matters, but China's inflated real estate market has been losing steam for the last year or so. That has rendered the company unable to continue its development of the new Chinese theme parks, and Six Flags is now looking for a contingency plan. More specifics on the matter will be provided during the fourth-quarter earnings call, but there will be a $1 million reduction in revenue and about $10 million in one-time charges related to the default during the last quarter of the year.

All hasn't been rosy with domestic parks either. In the same SEC filing, Six Flags said fourth-quarter revenue will be $8 to $10 million lower than a year ago, primarily due to lower season pass and membership sales during the holiday period.

When roller coasters aren't so fun

What does all of this mean? For one, it could mean that Six Flags' dividend -- which is now yielding 9.3% after the stock's recent tumble and after management just recently doled out a $0.01 per quarter raise -- could be in trouble. Times change, sometimes suddenly and without warning.

An $8 to $10 million hit in the fourth quarter is merely a 4% decline year over year, barely a drop in the bucket for a company on track to bring in more than $1.5 billion in sales in 2019. However, that dividend payment costs the company about $280 million each year, (assuming a share count of 84.5 million and annual dividend per share of $3.32) and the company's adjusted free cash flow (which the company calculates by adding back interest and tax payments) is only running at $269 million over the last year. Thus, that high yield could be at risk of a cut.

Besides the problems in China, Six Flags' domestic business could be showing signs of weakness. Competition might be hurting results as Disney's new Star Wars: Galaxy's Edge parks opened in California and Florida, not to mention competing roller coaster attractions from peers like Cedar Fair. It's too soon to tell, but after a near decade-long recovery in sales, the theme park operator might have reached a peak in North America for now. 

All told, that is creating some wild moves in the stock, not exactly the type of roller coaster ride income investors are looking for. It's entirely possible that the recent pullback is overdone, but for those looking for stable income, Six Flags is no beacon of stability at the moment.