Regional amusement park operator Cedar Fair
"In light of the weak economy and uncertain credit environment, we are considering alternatives to reduce the Company's debt levels and better position the Company for future growth," CEO Dick Kinzel announced on Friday morning. "One such alternative includes reconsidering the Company's distribution policy based on its overall long-term capital structure objectives."
Units of Cedar Fair took a 10% hit on Friday after the announcement. Another 10% haircut followed Monday, as more investors faced the inevitable.
Investors should have seen this coming, though. Leisure companies don't yield 16% in this low interest rate environment. Regal Entertainment
So many stocks have been battered so badly that they can afford to dramatically cut their rates and still provide attractive yields. If Cedar Fair decides to cut its quarterly distributions in half, for example, the 8% yield will still be higher than where it was a year ago.
Cedar Fair's move was really just a matter of time. It took on too much debt when it acquired the Paramount Parks chain from CBS
The beauty of seasonal theme parks is that they mostly go into hibernation for the winter. Most of Cedar Fair's attractions won't open for another few months. This actually buys it time to sit out the rocky economy, even if it's becoming more and more unlikely that consumers will be armed with discretionary income to click past the turnstiles in a few months.
"We will complete this evaluation in the near future and will not make any decisions on the level of future distributions until that review is completed and reviewed by the board," Kinzel notes.
Really? You're telling me that the company hasn't pondered a lower dividend as a way to ease the company's debt burden? Don't dance around the subject now. Just go ahead and rip off the bandage in one hard tug. Get it out of the way, because the uncertainty you otherwise breed creates these back-to-back days of double-digit percentage losses from folks who want everything laid out on the table.
Three years ago, Cedar Fair suspended its policy of handing out park and lodging discount coupons to investors with at least 100 units in the company. Many enthusiast investors -- like me -- complained, but life went on at the company. Now it's time for income investors to complain -- though they really should have seen this coming.
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