Amusement park operator Cedar Fair
Yes, that's right. The limited partnership cuts its quarterly distributions -- from $0.48 a unit to $0.25 a unit -- and investors cheered.
Maybe it's just me, but I remember when yield hikes were applauded. Wells Fargo
Sometimes the gain isn't as significant, but it's validated by heavy trading volume to the upside. Multiplex operator Regal Entertainment
I understand that there is some level of relief when a company hacks away at its dividend obligations. I'm just worried that it won't be long before we start punishing companies that are actually bumping their distributions higher.
As for Cedar Fair in particular, even the company braced investors for the inevitable hit.
"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 two months ago. "One such alternative includes reconsidering the Company's distribution policy based on its overall long-term capital structure objectives."
Fellow Fool Tim Beyers also called it last week.
"Capital IQ reports that Cedar Fair's debt stands at an astounding six times equity," he wrote on Friday. "Rare is the firm that can sustain that sort of ratio and still yield 25% in dividends, as Cedar Fair does. The math simply doesn't favor it."
The move will save the regional park operator $50 million a year. It is also looking to sell three of its smaller parks, which won't be easy in this dire economy, but will really help pare down the company's debt after its costly acquisition three seasons ago of the Paramount Parks from CBS
Oh, and speaking of CBS, the stock fell by 2% after it dramatically sliced its yield on Feb. 18.
Finally! Something that actually makes sense.
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